The loan-type cheat sheet
Variable rate loan
As the name suggests, the interest rate can change over the life of the loan. This gives you flexibility, but can also leave you open to rate rises. These loans also offer the option of additional repayments and redraw, as well as offset accounts.
Fixed rate loan
Basically, this is the opposite of a variable rate loan. Your interest rate and repayments will stay the same during the fixed term, no matter what. So no surprises. You can’t make extra repayments during the fixed term though, so it’s worth thinking about a split loan if you’re planning to pay extra.
The best of both worlds—you’re able to fix part of your loan, while leaving the rest variable.
Professional packages offer discounts on standard variable and fixed rates, the waiving of fees, and in some cases, great deals on other products from the same lender.
If you already own a property, this is a short-term loan that can help you finalise
the purchase of your new property before you’ve sold your existing one.
Line of credit loan
This one’s perfect if you need easy access to cash for renovating or investing. It lets you draw against the loan balance, up to a credit limit set by the lender.
Interest only loans
As the name suggests, you only pay the interest on the principal balance for a set term, with the principal balance unchanged.
If you want to build a home or change the structure of your existing home, this is your loan. Most construction loans are interest only for the first year while the build is underway and interest is charged on the amount you draw down on from the loan for building repayments.