Understanding Home Loan Types – Fixed, Variable and Splits

Choosing the Right Loan Type Matters

Once you’ve saved your deposit and are ready to buy, choosing the right home loan type can save you thousands over the life of your mortgage.
Each option—fixed, variable, or split—offers different levels of flexibility, risk and control. This guide breaks down what they mean and how to pick the one that suits you best.

1️⃣ Fixed Rate Home Loans

A fixed-rate loan locks in your interest rate for a set period (usually 1–5 years).
During that time, your repayments stay exactly the same, giving you stability and predictability.

✅ Advantages

• Certainty over your monthly repayments
• Protection against interest-rate rises
• Great for budgeting and first-time buyers

⚠️ Considerations

• Limited flexibility—extra repayments may be capped
• Break fees if you refinance or sell during the fixed term
• Miss out if variable rates fall

2️⃣ Variable Rate Home Loans

A variable-rate loan moves with the market. When interest rates change, so do your repayments.
Variable loans often include more features that can help you pay your mortgage off faster.

✅ Advantages

• Usually allows unlimited extra repayments
• Access to offset accounts and redraw facilities
• Flexible—can refinance or switch lenders more easily

⚠️ Considerations

• Repayments can rise if rates increase
• Harder to budget for long-term stability
• Rates vary between lenders, so comparison is essential

3️⃣ Split Loans – The Best of Both Worlds

A split loan divides your mortgage into two parts—one fixed and one variable.
It gives you the security of a fixed rate with the flexibility of a variable loan.

• Common split ratios: 50/50 or 70/30 (fixed/variable)
• Ideal if you want stability but still make extra repayments
• Break fees apply only to the fixed portion

Every lender structures split loans differently, so check features and fees carefully.

4️⃣ Comparing Loan Types Side-by-Side

5️⃣ Choosing Based on Your Goals

Think about where you are financially and emotionally:

• Fixed: Perfect if you value certainty and have a tight budget.
• Variable: Better if you can handle changes and want repayment freedom.
• Split: Ideal for balance—some stability, some flexibility.

No single type suits everyone; the best choice depends on how long you plan to stay in the property, your risk tolerance and your financial goals.

6️⃣ Other Loan Features to Consider

• Offset accounts: Reduce interest by linking your savings to your mortgage.
• Redraw facility: Withdraw extra payments when needed.
• Loan portability: Move your loan to a new property without refinancing.
• Package discounts: Bundled accounts and fee waivers for larger loans.

7️⃣ Interest-Rate Environment in 2025

After several years of rate changes, lenders are offering more flexible deals to attract first home buyers.
Comparing multiple lenders (not just the big banks) can uncover significant savings.
Keep an eye on both the comparison rate and the revert rate for fixed loans—these reveal the true cost once the fixed term ends.

8️⃣ When to Review or Switch Loans

Your loan type doesn’t have to be permanent. If your income rises, you build equity, or market rates drop, it may be worth refinancing.
A good broker will check your loan annually and show you if switching could save money.

🔟 Next Steps

Understanding the main loan types is a major milestone in your first-home journey.
Before you apply, review your goals, comfort level with rate changes, and potential extra repayments.
The right mix of stability and flexibility can make a huge difference over 30 years.