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Understanding home loans in Australia

A home loan is secured against property. Repayments need to fit your budget alongside everyday expenses and the costs of owning a home. If you cannot meet repayments, the property securing the loan may be at risk.

Compare home loan rates, costs and features

• Fixed and variable rates: A fixed rate provides repayment certainty during the fixed period, but extra repayments may be restricted and breaking the fixed term can involve costs. Variable rates can rise or fall, changing your repayments. A split loan combines fixed and variable portions.
• Interest and comparison rates: Look beyond the advertised interest rate. A comparison rate includes interest and certain fees using a specified loan amount and term; it does not capture every cost or reflect every borrowing situation.
• Repayment structure: Principal-and-interest repayments reduce the loan balance over time. Interest-only repayments do not reduce the principal during that period, and repayments can increase when it ends.
• Loan features: Consider offset accounts, redraw facilities and extra repayment options, including their fees, access conditions and restrictions.
• Introductory rates: Check how long a honeymoon rate lasts and what rate applies afterwards. An initial discount does not necessarily mean a lower total borrowing cost.

Plan your home-buying budget

1. Allow for the deposit and purchase costs, including conveyancing, inspections and any applicable stamp duty.
2. Budget for repayments, insurance, rates, maintenance and strata levies where relevant, while keeping a buffer for unexpected expenses.
3. Test your budget against higher interest rates or lower income. A longer loan term may reduce regular repayments but increase total interest paid.

First home buyers considering low deposit home loans should examine the total amount borrowed and any lenders mortgage insurance costs. This insurance protects the lender, not the borrower. Grants, concessions and government schemes have their own eligibility conditions, which can change.

Understanding home loan lending criteria

Lenders generally consider income, expenses, existing debts, credit history, deposit and the property offered as security. Self-employed borrowers may need tax returns, business financial records or other evidence of income. Low-doc home loans still require evidence of repayment capacity and may have different costs and conditions.

A previous refusal, bad credit history, discharged bankruptcy or limited savings history can affect borrowing options. Rather than assuming approval is available, review the reasons for any previous refusal and the ongoing affordability of the loan. Lender pre-approval is conditional, not a guarantee of final approval.

Assessing mortgage refinancing

When considering refinancing, weigh any potential interest savings against discharge fees, new loan costs, possible fixed-rate break costs and any lenders mortgage insurance. Compare costs over the remaining loan term: restarting a longer term can reduce repayments while increasing total interest.

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Please note that some of our calculators may use assumptions that are not necessarily applicable to your current specific circumstances and we therefore cannot always guarantee their accuracy.

We recommend that you seek professional financial advice from a licensed professional before proceeding with a loan.

Loan Repayment and Finance Modeling Calculators