Types of Home Loans: Compare Fixed, Variable and More

What Are the Main Types of Home Loans?

In Australia, home loans are not one-size-fits-all. Different structures offer different advantages depending on your circumstances. The most common types include variable rate loans, fixed rate loans,split loans, and interest-only loans. There are also specialised options like construction loans and bridging finance.

Each has unique features, benefits, and trade-offs. Understanding these will help you choose a product that supports, not restricts, your financial journey

Variable Rate Home Loans

A variable-rate home loan is the most popular choice in Australia. The interest rate fluctuates with the market, which means your repayments can increase or decrease over time. While this adds a layer of unpredictability, it also offers a level of flexibility unmatched by other loan types.

You can make extra repayments, access redraw facilities, and take advantage of interest rate drops to reduce your loan term. However, rate increases could stretch your monthly budget.

At Stryve Finance, we help you weigh up the risk versus reward and build flexibility into your mortgage.

What to Watch Out For

If interest rates rise, your monthly payments can increase, potentially affecting your household budget. Planning for this variability is key. While variable rates offer flexibility, they lack the predictability of fixed-rate loans. This can be a drawback for first-home buyers or those with tight budgets.

Is a Variable Loan Right for You?

A variable home loan may be suitable if:

• You plan to make extra repayments regularly.
• You want the freedom to refinance or switch loan types later.
• You’re comfortable with interest rate changes.
• You're investing and want to take advantage of tax-deductible interest.

Fixed Rate Home Loans

A fixed rate home loan locks in your interest rate for a set period, typically 1 to 5 years. This means your repayments remain unchanged during that time, regardless of changes in the broader market. It's an excellent option for buyers who want certainty and control over their finances, especially when budgeting for major life events.

The downside? You might miss out on rate cuts, and you’re often restricted in making extra repayments. If you break the fixed period early, break fees may apply. We help Stryve clients compare fixed and variable options to lock in the right rate, at the right time.

Considerations Before You Fix

While fixed rate home loans offer stability, they do come with trade-offs that are important to understand before locking in. One of the key limitations is reduced flexibility. Many lenders cap extra repayments during the fixed term, which can slow down your ability to pay off the loan early.

Additionally, if you decide to refinance, sell your property, or switch loan types before the fixed term ends, you may face break costs, which can be substantial. Fixed loans also typically don’t include an offset account, meaning you miss out on interest savings from linked savings balances. Finally, if market rates fall, you won’t benefit unless you refinance, and doing so could trigger fees

Example

Let’s say you borrow $500,000 on a 3-year fixed rate of 6.10% p.a. Your monthly repayment would be approximately $3,034, and it won't change for the next 36 months, no matter what happens in the market.

This can be a huge advantage for families planning around school fees, new babies, or single incomes.

Split Home Loans

Can’t decide between fixed and variable? A split home loan lets you do both. With this option, you allocate a portion of your loan to a fixed rate and the rest to a variable rate. For instance, you might split a $500,000 loan into $300,000 fixed and $200,000 variable.

This strategy offers the stability of fixed repayments while still enjoying the flexibility and potential savings of variable rates. You can make extra repayments on the variable portion and hedge against future rate rises.

At Stryve Finance, we help clients structure their split loans to maximise their advantage

Considerations of a Split Loan

While split loans offer valuable flexibility, there are a few things to keep in mind. Managing two parts of a loan means dealing with different interest rates, terms, and features, which can add a layer of complexity. The fixed portion typically comes with restrictions, such as limits on extra repayments or break fees if you exit the fixed term early.

Meanwhile, the variable portion may offer more flexibility but can also be affected by rising interest rates. Additionally, lenders might apply different fees or conditions to each portion, so it's important to understand how they interact.

At Stryve Finance, we walk you through the pros and cons of each side of the split to ensure your structure works both now and into the future

Is a Split Loan Right for You?

Split loans work best for:

• Homeowners want stability without giving up flexibility.
• Investors who want to lock in part of their repayments while keeping the ability to leverage market dips.
• First-home buyers looking to “test the waters” of variable rates while staying partially protected.

Example

Let’s say you're borrowing $600,000. You might choose to fix $400,000 for 3 years at 5.5% interest and keep $200,000 variable. This way, you:

• Know exactly what your repayments will be on the fixed portion, helping with budgeting.
• Still have room to make unlimited repayments, access redraw, or benefit from interest rate cuts on the variable portion.

At Stryve Finance, we help you model out different split scenarios using real lender data. So you can confidently choose the ratio that fits your goals.

Interest-Only Loans vs Principal and Interest Loans

When you take out a home loan, you’ll choose between two repayment structures: interest-only or principal and interest.

• Principal and interest loans are the standard choice. Each repayment reduces the loan amount (principal) while covering the interest. Over time, you build equity in your home and reduce debt.
• Interest-only loans let you pay only the interest for a period (usually 1-5 years), keeping repayments lower. These are popular with investors who want to maximise cash flow or claim tax benefits.

Key Insights:

• Interest-Only repayments remain lower throughout ($2,100/month), offering short-term cash flow benefits.
• Principal & Interest repayments are higher ($2,700/month) but begin reducing the loan balance immediately, resulting in long-term savings on interest.

However, interest-only loans delay principal repayment, potentially increasing your total loan cost. Stryve helps investors and owner-occupiers assess whether this structure aligns with their broader financial plan.

Home Loan Types by Buyer Profile

Different borrowers benefit from different loan types. Here’s how:

• First-time home Buyers often prefer fixed rates for stability or variable rates for flexibility, especially when combined with government grants or deposit schemes.
• Investors lean toward interest-only or split loans to manage tax implications and maximise returns.
• Downsizers or retirees may prefer fixed loans and offset accounts to manage income security.
• Self-Employed Borrowers often need alt-doc loans or more flexible lending criteria.

At Stryve Finance, we tailor loan options based on your employment type, life stage, and goals. So you're not stuck with a structure that doesn’t fit

Special Loan Types

Beyond the basics, there are specialised home loans to suit unique situations:

• Construction Loans allow funds to be drawn down in stages, aligning with a building schedule. This ensures you’re only paying interest on the amount used.
• Bridging Loans offer temporary financing when buying a new home before selling your old one. They help avoid rushed decisions or missed opportunities.
• Green Loans may provide incentives for eco-friendly homes or sustainable upgrades (check availability with your lender).

Stryve brokers, are experienced in handling non-standard loan types and ensuring you're aware of hidden costs or timing traps.

Features That Can Impact Your Loan Choice

Some loans come with features that improve flexibility or reduce interest, but they often come with added costs. The most common are.

• Offset Accounts: A linked savings account that reduces the interest charged on your loan.
• Redraw Facilities: Allows you to access extra repayments made on your loan.
• Package Discounts: Combine your loan with credit cards, fee waivers, or discounted rates.

These features are only beneficial if you use them. At Stryve, we conduct a full review of your financial habits to ensure you're not paying for perks you won’t use

Let Stryve Finance Help You Make the Right Move

At Stryve Finance, we do more than compare rates. We craft mortgage strategies that work for you. Whether you're buying your first home, investing, or refinancing, we match you with the right loan and lender.

• Access 40+ lenders
• Fast pre-approvals
• Free, expert guidance
• Personalised loan structure recommendations

📞 Book your free consultation today and discover the smartest way to finance your future