Finding a home loan
In most situations, it’s common for people to borrow money to buy a home. This is known as getting a home loan or a mortgage.
A home loan is made up of 2 parts:
- principal, the amount borrowed from a lender
- interest, the cost of borrowing the money
Choosing a home loan
A home loan is a long-term debt, so even a small difference in interest adds up over time. This is why it’s important to check the interest rate when you’re looking for a home loan.
When choosing a home loan, know the loan repayment options and how they might impact your budget. You’ll need to consider principal and interest repayments or interest only repayments.
If you're unsure, talk to your bank, lender or a financial professional to understand what may work best for your financial situation.
Types of home loans
When you’re deciding which type of home loan to get generally, you’ll be choosing between either a variable-rate loan or a fixed-rate loan.
This is the most common type of home loan. It means your interest rate will change over the term of your mortgage depending on the current interest rate offered by your lender.
Some months you might pay less interest, while other payments can be higher.
A fixed-rate means your interest rates are set, no matter what the official interest rate charged by your lender is.
Interest rates are generally fixed for 2 to 5 years and then they revert to a variable rate for the remaining term of your mortgage.
Fixing your rate can give you a level of financial security, where you know how much your mortgage repayments will cost you each month.