Types of loans

These loans are the most common type available. The variable rate loan offers more features and flexibility than the basic or “no frills” loan, so the rate is usually slightly higher. The extra options (for example a redraw facility, the option to split between fixed and variable, extra repayments and portability) should be taken into account when choosing your type of variable loan. Repayments will vary as interest rates fluctuate.

These loans are set at a fixed interest rate for a specified period (usually one to five years). The advantage of allowing you to organise your finances and repayments without the risk of rising interest rates is offset by the disadvantage of not benefiting from a drop in rates. At the end of the term all fixed loans automatically revert to the applicable variable rate. At this stage you have the option to lock in another fixed rate for a new term, switch to variable or go for a loan where you split with a percentage fixed and the remainder variable. However these loans may have limited features and lack the flexibility of 100% variable loans. There may be early exit fees and limited ability to make extra payments.

An offset account is a savings account attached to your loan account. Money in this account is offset against the loan amount thereby reducing interest payable. Significant savings are made by reducing compound interest with the use of these accounts.
Other advantages of an offset account include being able to pay off your home loan faster than the repayment schedule demands and being able to redraw money if the need arises.

These loans are offered to provide an all-in-one home loan package. They offer interest rate and fee savings on your home loan, credit card and transaction accounts. Some lenders also waive the annual fees for your credit cards. An annual fee ranging from $120 to $395 is usually applicable on these loans. Professional packages can also offer amazing flexibility, with some lending institutions willing to waive product switching fees when changing from a variable to a fixed rate or converting a principal and interest type loan to an interest only loan.