Property · Owner-occupied home loans
Residential home loans, explained properly.
A home loan is the largest and longest commitment most Australians ever make, and most of what it costs you is settled by how it is structured — not by the rate on the billboard. Here are the decisions in plain language, so that when we talk you already know what you are choosing between.
Decision one
Variable, fixed, or a bit of both.
People agonise over this one, usually for the wrong reason. You are not predicting where rates go — nobody on either side of the desk can. You are deciding how much certainty you want to buy, and what you will give up for it.
| Structure | What it gives you | What it costs you |
|---|---|---|
| Variable | Flexibility. Extra repayments without a cap on most products, a full offset account, and no break cost if you refinance or sell. | Your repayment moves when the lender moves its rate. A run of increases lands straight on the household budget. |
| Fixed | A repayment that does not move for the fixed term. Genuinely valuable if a stable number is what lets you sleep. | Extra repayments are usually capped. Offset is often unavailable or partial. Exiting early — to sell, refinance or repay — can trigger a break cost calculated on the lender's funding position, and it can be substantial. |
| Split | Part fixed, part variable, in whatever proportion you choose. Some certainty, some flexibility. | A diluted version of both. The offset only works against the variable portion, and the fixed portion keeps its break conditions. |
Not "where are rates heading" but "what would I do if things changed in the next three years?" If there is a real chance you sell, renovate or pay down a lump sum, fixing the whole loan puts a fee in front of each of those. If none of that applies and a moving repayment would genuinely stress you, fixing buys something worth having. A split is a legitimate answer, not a fence-sit.
Decision two
Principal and interest, or interest only.
A principal-and-interest loan repays the debt. Each repayment covers the interest for the period and chips something off the balance, and because interest is charged on the balance, every repayment shrinks the interest in the next one. That works quietly in your favour for decades.
An interest-only loan repays nothing. You cover the interest and the balance sits where it started. The repayment is lower, which is the whole appeal, but it buys time rather than progress. Two things follow:
- The repayment steps up when the period ends. The loan still has to be repaid within its original term, so the principal you skipped now has to be repaid over fewer remaining years. The jump is not gentle.
- You pay more interest overall. The balance stayed high for longer, so more interest was charged on it. Over the life of a loan that difference is one of the larger numbers in the whole arrangement.
None of which makes interest only wrong. It has real uses: an investment property where the interest is deductible and the owner is deliberately attacking non-deductible debt instead, a construction period where you are paying rent and progress payments at once, or a temporary drop in income where the alternative is arrears. What it should never be is the thing that makes an unaffordable purchase look affordable.
Before accepting an interest-only period, ask what the repayment becomes the day it ends, and check the household could carry that number today. If it could not, the loan is not affordable — it is deferred. We will put that figure in front of you at the start rather than letting you meet it in a letter years later.
Decision three
Offset and redraw are not the same thing.
The words get used interchangeably and the two behave very differently. Both reduce the interest you are charged. The difference is where your money sits and who controls access to it.
| Offset account | Redraw | |
|---|---|---|
| Where the money is | A separate everyday transaction account in your name, linked to the loan. | Inside the loan. You paid it off the balance and are asking for some of it back. |
| How it saves interest | The balance is deducted from the loan balance before daily interest is calculated. | The balance genuinely is lower, so there is less debt to charge interest on. Same arithmetic. |
| Getting at it | It is a transaction account. Card, transfers, salary paid in, like any other. | Access sits under the lender's terms, and those can change. Redraw may be limited, delayed, subject to a minimum, or stopped if the loan falls into arrears. |
| If you later rent the place out | Money in offset stays your money. Withdrawing it does not change what the loan was borrowed for. | Redrawing is fresh borrowing, judged by what you spend it on. Redrawing for a car or a holiday can contaminate the deductible portion of an investment loan. |
| The catch | Often attached to a package or product with an annual fee, and absent from some cheaper loans. It only pays for itself if you carry a real balance. | Usually free and usually fine. Just do not treat it as savings you can count on reaching. |
The practical rule: if you keep a meaningful cash buffer, an offset is usually worth paying for, and the loan with the lowest rate and no offset is not automatically the cheapest loan for you. If your buffer is thin and you just want the debt gone, redraw on a no-frills variable loan does the job without the annual fee.
The assessment
What a lender is weighing up.
Can you service it
Income and how reliable it is. Base salary reads most favourably; overtime, bonuses, commission, casual and self-employed income all count, but each carries its own evidence requirements. Against that sit your living expenses, dependants, other loans, and credit card limits — which count in full whether or not you use them.
How you have handled credit
Your file shows conduct as well as a score: missed payments, defaults, how long accounts have run, and how many applications you have made lately. A burst of recent enquiries is itself read as a negative, which is why we check policy before anything is lodged rather than after.
The deposit and the property
How much you are contributing, where it came from and how long you have held it. Then the property: type, size, location, condition, and whether the lender's valuer agrees with the contract price. Unusual properties and some postcodes are treated more cautiously, lender by lender.
Three things people get wrong
Mortgage insurance, borrowing power, and the real cost.
Lenders mortgage insurance protects the lender, not you
This is the most misunderstood item on a home loan. Lenders mortgage insurance covers the lender if a borrower defaults and the property sells for less than the debt. You pay the premium, you are not the insured party, and if the worst happens the insurer can pursue you for what it paid out.
It is generally charged when your deposit is small relative to the price — the smaller your share, the more exposed the lender is. The premium is normally a one-off, usually added to the loan rather than paid in cash, so you also pay interest on it. It is typically not portable if you move to another lender, and refunds, where they exist at all, are partial and time-limited.
The honest framing: it is a cost you accept in exchange for buying sooner with a smaller deposit. Sometimes that is clearly right, because a year spent saving while prices move against you can cost more than the premium. Sometimes it is not. It deserves a calculation rather than a rule of thumb. It can also sometimes be reduced or avoided — a larger deposit, a family guarantor arrangement, or waivers some lenders extend to particular occupations. Which of those is open to you is exactly what we check.
Borrowing power is not a number you can look up
Calculators give you a figure. Lenders give you a different one, and they give each other different ones, because each runs its own servicing model. Broadly, what drives it:
- Assessable income, not gross income. Each lender decides how much of your overtime, bonus, commission or rental income it will recognise, and conservatism is required of them.
- A buffer above the actual rate. Lenders do not test today's repayment. They test you at a higher assessment rate, which is why you can always borrow less than a simple repayment sum suggests.
- Commitments, in full. Other loans, study debt, car finance, buy-now-pay-later, and the limits on your credit cards. Closing a card you never use is often the highest-leverage move available before applying.
- Household expenses. Assessed against your statements and a benchmark, whichever is higher. Three months of clean, readable banking helps more than people expect.
- Term and structure. A longer term lowers the assessed repayment and lifts capacity, at the cost of more interest over the life of the loan.
Because the models differ, the gap between the most and least generous lender for the same applicant can be wide. Finding where you sit best is much of what a broker is for.
The rate is not the cost
A loan has a rate, and it has costs the rate does not describe: application or establishment fees, valuation, settlement and legal fees, annual package fees, monthly account fees, fees to split the loan, fees to discharge it, and break costs on a fixed exit. Alongside those sit the costs of buying — stamp duty, conveyancing, building and pest, insurance, moving — which are not lending costs but still have to come from somewhere.
The comparison rate folds ongoing fees into one figure and is a useful sanity check. It is not the answer, because it is calculated on a standard loan amount and term that probably are not yours, and it ignores features you would actually use. The only reliable comparison is the total you will pay over the period you realistically expect to hold the loan, fees included. That is a modelling job, not a scan of a rate table.
Why a broker
What we do that a branch cannot.
A bank lender is employed to sell that bank's loans. That is not a criticism, it is the job description — but it means one policy, one servicing model, one product set. If you do not fit it, the answer is no rather than "try over there".
- We compare a panel, not a shelf. More than sixty lenders, including ones without branches. Where lenders differ most is not headline pricing but policy: how they treat casual income, self-employment, a recent job change, an unusual property.
- We check policy before your credit file. We work out where you fit before anything is lodged, so you are not learning lender appetite through a run of declines that each leave a mark.
- We structure the loan, not just source it. Splits, offsets, repayment type, term, and whatever you are planning next. Structure is where most of the long-run money is.
- We are paid by the lender. Commission is disclosed to you in writing before you proceed, and it is broadly standardised across lenders, so it is not what drives the recommendation.
What we cannot do is invent a policy that does not exist. If nothing on the panel fits you right now, we will say so and tell you what would need to change.
Get ready
What to have handy.
You do not need all of this to start a conversation, only to finish one. Delays in home lending almost always come from missing paperwork rather than from the lender.
If you are buying rather than refinancing, conditional approval before you bid tells you the range you are working in and shows an agent you are organised. Be clear about what it is, though: a lender's view based on what you have declared, subject to valuation and full assessment. It is not a commitment to lend, and it does not survive a change in your circumstances.
Common questions
Home loans, answered.
How much deposit do I actually need?
There is no single figure, and any site that gives you one is oversimplifying. What matters is your deposit relative to the price, because that drives whether mortgage insurance applies and which lenders will look at the file. You also need funds for the costs of buying — stamp duty where it applies, conveyancing, inspections, insurance — and those are the ones people forget.
Should I fix my rate?
The useful version of that question is not about forecasting. Fixing buys certainty and pays for it in flexibility: capped extra repayments, offset often unavailable, and a break cost if you exit early. If your next few years are settled and a moving repayment would genuinely stress the household, that trade can be worth making. If there is a real chance you sell, renovate or pay down a lump, fixing the whole loan gets expensive.
Is an offset account worth paying for?
Only if you will keep money in it. An offset earns its keep by reducing the interest charged every day, so a well-funded offset on a slightly higher rate can beat a cheaper loan with nothing attached. An empty offset sitting behind an annual package fee is just a cost. Be honest about the balance you would realistically hold, and we will model it both ways before you commit.
Can I use money in redraw whenever I want?
Usually, but not as a right you should rely on. Redraw sits inside the loan, and the terms governing access belong to the lender, which can limit, delay or restrict it — particularly if the loan is in arrears. There is a tax dimension too: if the property might become an investment later, redrawing creates new borrowing whose deductibility depends on what you spend it on, while money in an offset stays your own. If a cash buffer matters to you, offset is the cleaner structure.
What is lenders mortgage insurance and can I avoid it?
It protects the lender against loss if a borrower defaults and the security does not cover the debt. You pay for it, you are not covered by it, and the insurer can pursue you for what it pays out. It is generally triggered when your deposit is small relative to the price. It can sometimes be reduced or avoided with a larger deposit, a family guarantor arrangement, or an occupation-based waiver some lenders offer. Whether any of those apply to you is a policy question we can check before you apply anywhere.
Will using a broker cost me more?
No. We are paid a commission by the lender that settles the loan, disclosed to you in writing before you proceed, and it does not sit on top of your rate. Commission is broadly similar across lenders by design, so the recommendation is not steered by what pays best. In a small number of specialist scenarios a fee can apply, and you would be told before any work was done rather than after.
I am self-employed. Is that a problem?
Not a problem, a different evidence set. Most lenders want tax returns and financials covering a couple of years and assess the income you declared — which is where self-employed borrowers often come unstuck, since legitimately minimising taxable income also minimises assessable income. Some lenders take a broader view, adding back non-cash items such as depreciation, and some assess on alternative documentation. Which route suits depends on your structure and your figures.
How long does the whole process take?
It varies with the lender, the complexity of the file and how fast documents arrive, so we will not put a number on it here — anyone who does is guessing. We can tell you where the time goes: gathering documents, the valuation, and satisfying conditions after approval. The first and last of those are the parts you control, which is why we ask for everything up front. Once we know your file we will give you a realistic timeframe and keep you posted.
Let's talk
Tell us the situation. We'll tell you what it means.
No cost, no obligation, and no credit enquiry while we work out where you stand. If a home loan stacks up, we will find the structure that suits how you actually live. If the numbers say wait, we will say that instead.
The Finance Team is a trading name of Online Showroom Pty Ltd, a credit broker rather than a lender, operating under Australian Credit Licence 551493. This page is general information only and does not take your objectives or circumstances into account. Any figures we prepare for you are estimates, not an offer of credit, and every application is subject to assessment and approval by the lender on that lender's terms.
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