Home loans can be boiled down to two main types - principal and interest loans, where you pay off the loan amount plus interest (most common type) and interest only loans, where you only pay the interest (popular with investors).
To help you along the way here are some basic considerations;
- Interest rate - try and get the lowest rate you can, as even a small difference can add up to thousands of dollars over the life of the loan.
- Loan term – this impacts the size of your repayments and the interest you’ll pay, so aim for the shortest term you can afford (i.e. shorter term = higher repayments but less interest).
- Fixed or variable interest rate – a fixed rate helps you budget because your repayments remain the same, but you won't benefit if interest rates fall. A variable rate usually offers more loan features, but your repayments will go up if interest rates rise.
- Loan features – these include redraw or line of credit facilities and an offset account so you can put extra money into your loan to reduce the interest you pay. Most cost extra though, so choose a loan with features you will use.
- Loan fees - these can include application fees (up to $850), valuation fees (up to $800), annual fees (up to $500) and settlement fees (up to $200). The exception is a Tic:Toc home loan, where all of these fees are $0.