Different Types of Home Loans

4 January 2021

Different Types of Home Loans

If you’re researching home loans in Australia, you have plenty of options. Here are the major ones.


Variable rate

Variable rate home loans have an interest rate that can move up or down based on market conditions.

Fixed rate

Fixed rate home loans have an interest rate that is fixed for a set period (usually one to five years). The fixed rate will stay the same regardless of movements in market rates.

It can be good to lock in a low fixed rate if interest rates are forecast to rise or if you need repayment certainty.


A split loan has a portion of the loan at a fixed interest rate and a portion at a variable interest rate. It allows you to ‘hedge your bets’ if you don’t know whether interest rates will rise or fall in the future.

Interest-only home loans

An interest-only loan requires that you only pay interest for a set period (usually up to five years). At the end of this period, you owe exactly the same amount you initially borrowed (called the principal). The loan then usually converts to a ‘principal and interest’ loan.

Principal and interest (P and I)

A P and I loan is a standard home loan that requires you to fully repay the amount you borrow, plus interest. Standard P and I home loan terms in Australia are 25 or 30 years.

Line of credit home loans

A line of credit home loan will give you pre-approval to access the equity (ownership) that you build in your home over time. In other words, you can borrow against that equity in the future if you need to. For example, for a renovation or extension.


If you’re planning on building a new home instead of purchasing an existing one, it’s important to know that a construction loan is the specialised type of loan you’ll need. To find a construction loan that suits your needs, it’s essential to consult with a reliable and affordable mortgage broker in Newcastle who can advise on your borrowing power and responsibilities. 

Debt consolidation

Debt consolidation home loans allow you to combine other high-interest debt that you may have (like personal loans or credit card debt) into a low-interest home loan. This can save you money as well as making your overall debt repayments easier to manage.

Low/no deposit

Low (or no) deposit home loans are offered by some lenders in Australia. They have higher interest rates and will also usually require you to pay for lenders’ mortgage insurance.

Most lenders will usually classify a deposit of less than 20% as being a low deposit home loan.

Guarantor home loans

A guarantor home loan is where a person (usually a family member) agrees to become legally responsible for your repayments if you don’t make them. Lenders may require you to provide a suitable guarantor if you have a low (or no) credit rating.

How we can help you get your home loan

At Wisebuy Investment Group in Newcastle, our experienced and licensed brokers can help you to get the right home loan for your specific needs. And best of all, our service is free!

Contact us today for an obligation-free chat to find out more. We’d love to hear from you!