Types of home loans

Once the construction of your home is complete, you will need to decide what home loan is right for you. You will need to weigh up the pros and cons for your individual circumstances and work out the benefits of each of the loan types as they come in many variations.

Fixed rate mortgage means your interest rate is locked in for an agreed period of your loan term with the option of 1-5 years. It also gives you peace of mind in case interest rates rise.

Variable rate is a home loan product which has an interest rate which fluctuates up or down in accordance with market changes, unlike a fixed rate home loan.

Split rate – A split loan allows you to borrow part of your mortgage on a fixed interest rate and the remainder on a variable interest rate – all under the one loan product.

Principal and interest – a principal and interest payment means your repayment is divided up into two portions. Some of your repayment is sent towards paying off the interest due on your outstanding loan amount, while the remainder goes towards paying off the outstanding loan amount itself.

Interest only – In an interest-only loan, the lender writes a standard mortgage but agrees to a term in which the borrower pays only the interest, which means monthly repayments are lower than a P&I loan. Over the term of the interest-only loan, the loan principal is unchanged.