If you’ve ever been through the process of choosing a home loan you’ll know that there are literally hundreds of different products to choose from.

But before you delve into the sometimes confusing array of loans on offer, there’s one even more important decision you need to make first – what TYPE of loan are you looking for?

The majority of home loans fall into one of three categories: fixed rate loans, variable loans and split loans. Each type of loan can provide you with specific benefits – but how do you know which one is right for you? To help you decide, we’ve broken each loan type down into its pros and cons so you can get a better idea of which option might suit you best. We’ve done the hard work for you!

So if you’re in the dark about which option is best for you, look no further- we’ve got you covered!


A fixed rate home loan means that you lock in an interest rate for a set period of time (usually 1, 3 or 5 years). At the end of the fixed rate term, the loan will usually change to the standard variable rate offered by the lender.

While fixed-rate home loans ensure that fluctuating interest rate rises do not affect you, this also means that rate drops won’t apply to you. Fixed rate home loans can also restrict features such as redraw facilities, extra repayments and break fees often apply.



  • Locking in an interest rate will mean that interest rate rises won’t affect you.
  • Your repayments will not fluctuate, which can make it easier to budget.
  • Locking in an interest rate will mean that interest rates drops won’t apply to you.
  • Break fees apply if you wish to end a fixed loan before the contracted end date.
  • Capped or no extra repayments.

Best for: Fixed rate loans are great for people that want the security of knowing their repayments aren’t going to change. So if you’re on a tight budget a fixed rate loan can really help with managing your cash flow.


If you decide not to fix your home loan, your interest rate will move with the changes in market interest rates. This means that your interest rate could rise and fall over the life of your loan, which may affect your repayments. Variable rate home loans are generally more flexible with your repayments, redraw facilities and offset options.



  • Interest rate drops will affect your repayments.
  • You could pay off your home loan faster by making extra repayments.
  • No exit fees if you wish to refinance your loan or sell your property.
  • Interest rate increases will affect your repayments.

Best for: Variable rate loans are great for people that want the flexibility of paying extra repayments into their home loan.  So if you’re looking to pay off your home loan as quickly as possible, a variable rate home loan will offer you the flexibility you need, with all the added benefits of an offset and redraw facilities.

A variable rate option is also great for people who are planning on ‘flipping’ their property- in other words, people who buy property to sell it shortly after, because there are no exit or break fees.


You can also take advantage of fixed and variable options by splitting your loan, meaning that one part is fixed and the other part is variable. This can offer you the best of worlds, security from interest rate rises and the benefits of interest rate drops.



  • Only the variable rate portion will be impacted by interest rates.
  • Allows interest rate security on the fixed portion, with repayment flexibility on the variable portion.
  • Allows access to variable loan features, such as extra repayments and redraws.
  • Interest rate increases will affect your repayments on the variable rate portion.
  • Break fees apply if you wish to end the fixed rate portion before the contracted end date.
  • Capped or no extra repayments on the fixed portion.
  • Two repayments versus one.

Best for: Splitting your home loan into both fixed and variable portions are great for people who want the security of knowing that their repayments won’t change on the fixed portion and the flexibility of knowing that they can pay extra repayments into the variable portion. So if you want the best of both worlds, splitting your home loan might be the option for you.

Want to discuss which options are best for you?

Get in touch with a MOVE Bank lending specialist here or on 1300 362 216!

This blog post is for general information purposes only and is not intended as financial or professional advice. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product or other professional advice. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article. Railways Credit Union Limited trading as MOVE Bank ABN 91 087 651 090. AFSL/ Australian Credit License number 234 536 | ABN 91 087 651