Here are the main types of mortgage options so you can compare and see what is best for you. Many people just choose the mortgage with the lowest interest rate, but it is worth comparing different loan features and your goals. The higher interest rate might be worth the mortgage loan flexibility.
Basic variable rate mortgage
This mortgage may give you a lower rate than the standard variable rate, but some features are not available - or you may need to pay extra for them.
Basic rate, no frills mortgages generally offer you low rates although they could come with fewer features.
Most basic rate mortgages generally offer competitive mortgage rates and could suit you if your focus is a low interest rate.
Standard variable rate mortgage
These mortgages generally have a higher rate than the basic variable rate, but with more features.
What are the 'variables' in a variable rate mortgage?
Variable Rate mortgages simply mean that the interest rate you pay fluctuates as your lender reacts to the market and economic conditions. A variable rate can change at anytime and will affect your regular repayments.
Standard Variable Rate mortgages usually contain the bells and whistle loan options - such as offset accounts, waived loan application fees and discounts on other banking products like insurance, transaction accounts and more.
See more of our Variable Rate Home Loans
Fixed interest mortgage
With this type of mortgage you can protect yourself from interest rate rises by fixing your interest rate. This means certainty of the amount you need to pay because your repayments also stay the same for the same 'fixed period'. As the borrower you can generally chose a fixed period between 1 to 5 years. However your lender may charge you fees to break your loan during the fixed period.
You can protect yourself from unexpected rises in interest rates simply by fixing your home loan for a term of 1 to 5 years. This way you always know exactly what your repayments will be.
A fixed rate mortgage offers you certainty to know that whatever is happening in the economy or housing market, your interest rate and your repayments won't change for the fixed period.
One thing to consider is most lenders will usually cap the maximum time that you can 'fix' the rate of your mortgage, usually around the five-year mark. You may be charged fees to break your loan during the fixed period.
Often you can fix a portion of your overall mortgage. So if you're someone who likes to hedge your bets, perhaps you should consider a combination of fixed and variable rate options for your mortgage.
Fixed Rate Home Loan
Line of credit
A line of credit loan is a flexible loan allowing you to draw down and repay smaller and larger sums at any time up to the approved limit. These loans have no agreed term and repayments are interest only based on the amount you have drawn down at the time.
A line of credit mortgage loan lets you borrow up to an agreed credit limit and once you've repaid a part or all of it, you can redraw it again up to that credit limit without incurring redraw fees.
A line of credit mortgage may be a flexible way to borrow money for investments, wealth creation or renovations. These loans have an agreed term and repayments are interest only based on the amount you have drawn down at the time.
An offset account is a transaction account linked to your mortgage, where cash in your transaction (offset) account reduces the amount of interest payable in your mortgage account. This helps you pay off your home loan quicker.
With some construction loans you can pay for the land, and the construction of your owner occupied or investment property. If you're using part or your entire mortgage for construction, the total amount won't come to you up front. Rather the money will be made available through progressive payments that are paid straight to the builder.
Instead of making one full withdrawal to buy the property, a construction mortgage lets you access the loan in installments over a certain time frame.
You could start by paying the deposit on a block of land or pay for it in full, and then make payments to the builder at various stages of the construction. For example, you could draw down on your loan installments when the slab is laid, or the house frame is finished, or when brickwork is completed, and so on.
A construction mortgage essentially means that the money and subsequent interest charges will occur through progressive payments.
Honeymoon rate mortgage
These mortgages discount the introductory mortgage rates. After a certain time, usually 6 to 12 months, they revert back to the variable rate mortgage. Consider the mortgage interest rate after the honeymoon is over.