Home Loan Glossary

There are many home loan interest terms which are mortgage industry specific. Knowing what these terms mean is important when searching for the best home loan.

Interest Rates

Because there are so many types of borrowers and loan products there are also different types of Interest Rates.

These Are:

Variable Interest Rates

Best Home LoanWith a Variable Interest Rate the interest rate goes up and down in response to changes in the cash rate (Reserve Bank Cash Rate) and other changes by your mortgage / home loan provider.

The biggest advantage of a Variable Interest Rate is that your loan is not locked into a pre determined interest rate for a set period of time. Variable interest rate home loans make up the majority of mortgages in Australia.

Fixed Interest Rates

Fixed Interest Rate Home Loans allow borrowers to lock in the interest rate of their home loan at a pre determined rate for a period of time (usually between one and five years).

This is an option some borrowers take so that the monthly repayments on their home loan are completely predictable for the fixed interest period. There are however a different set of fees involved with a fixed interest loan. These fees are part of the PDS and are also explained on the ASIC website on their FEES page.

Part Variable Part Fixed Interest

As the name suggests you may also have your home loan divided up into a variable interest component and a fixed interest component.

Introductory Interest Rate

This is predominantly a marketing strategy used by lenders to help attract more new business. The interest rate is discounted for the first 6, 12, 18 or even 24 months at which point it reverts to the lender’s basic variable rate. The lender’s PDS on this product will also declare any penalties you may encounter if you choose to change lenders before a pre-determined period. Again we recommend you check the ASIC FEES page on their website.

 

Home Loan Interest Rates