The two main types of home loans are the fixed home loan and the variable home loan. As the name suggests, the fixed home loan gives you repayment stability despite the changes in the market interest rate. This loan is also good for proper handling of finances and stability against rate hikes. However, your loan stays at a higher rate if the market interest decreases and any extra repayments are penalised.

Meanwhile, the variable home loans allow borrowers to pay in varied amounts according to the changes of the official cash rate. Since market conditions change from time to time, more borrowers opt for this loan in hopes of low repayments.

Likewise, the interest rate of a variable home loan will go up if the RBA official cash rate increases. Since a variable loan has more flexible features as compared to a fixed loan, variable loans usually have higher interest rates to shoulder these features.

If you cannot decide on one home loan, you can also have a split home loan which has the characteristics of both a fixed and variable home loan. With a split loan, you can pay part of your loan on a fixed rate and the other part on a variable rate. This type of home loan makes repayment faster as well.

On the other hand, interest only home loans let you pay only the interest rate of the home loan for a period of one to five years. After which, you must start paying off the principal and repayments of the loan amount.

Interest-only home loans can initially cut the expenses needed when purchasing a residential property. This cut then allows you to use the money saved towards other expenses. On the downside, lenders will weigh your capacity to shoulder the loan through your repayments and this can limit your chances of borrowing more funds.

Honeymoon home loans start with a low starting interest rate for a honeymoon period that usually lasts for six months to one year. After which, the rate reverts to normal rates and the principal amount must be paid off. First home buyers and businesses that are starting up opt for this deal to give them more savings in the term’s initial years.

Meanwhile, a no deposit home loan allows you to borrow the full amount of the property’s purchase price. Finally, an equity home loan or Line of Credit home loan has a continuing pre-set limit that is fixed. The money that is saved in the line of credit loan can be used for shares and renovations of a personal or investment property. However, its interest rate is higher as compared to the standard rate and this deal can bring a lot of financial problems if it is misused.