Exploring your home loan options

With various home loan options available, it can be challenging to know what is the right option for you when beginning your research. Understanding what key factors to consider when making your decision can help streamline the process. 

Understanding home loan deposits

Most home loans require a borrower to have at least 20% of the property value as a deposit. These loans are generally considered lower risk and have lower requirements for borrowers. However, other types of loans are available and might be right for you.

Low deposit

Typically, a low deposit is defined as less than 20% of the property value. However, some lenders may accept lower deposits, even as low as 5%. It is important to research and compare different lenders to find the best low deposit home loan option that suits your needs and financial situation.

Strengths

Purchasing a property with a low deposit home loan may enable you to enter the property market sooner than you would with a higher deposit, as you won’t need to save up as much of a deposit. 

Things to think about

When obtaining a low deposit home loan, lenders will usually require you to pay Lenders Mortgage Insurance (LMI) or a Lender Protection Fee (LPF), which is an additional cost added to the loan amount (or alternatively, paid upfront). Additionally, interest rates for low deposit home loans may be higher than those for standard deposit home loans.

After selecting a lender, the next step is to choose the type of interest rate that suits your financial goals and preferences.

Variable

When you opt for a variable interest rate on your home loan, you should be aware that the rate can fluctuate over the life of the loan. Variable interest rates typically go up or down in line with the lender’s cost of providing the funds for your loan, this may be the result of the Reserve Bank changing the official cash rate, or due to other funding factors such as the Bank Bill Swap rate (BBSW) changes. When your interest rate changes, this impacts the amount of interest that accrues on your loan, and will therefore also impact your home loan repayments. 

Strengths

The key benefit of this type of loan is that if funding costs decline, so will your home loan repayments if the decline in costs is passed on to you by your lender. Additionally, this type of loan generally allows you to make unlimited extra repayments without incurring penalties, as well as redraw those funds if you need them. Many lenders will also give you the option of a 100% offset facility on a variable loan, allowing you to further reduce your interest repayments. Qantas Money Home Loans provides the option of multiple offset facilities on our variable rate Offset and Atlas Home Loans++. The flexibility of a variable rate home loan also makes it easier to change your loan, such as refinancing to a new lender or borrowing additional funds if your circumstances change. 

Things to think about

Your repayments can increase or decrease depending on the lender’s cost of providing the funds for your home loan. This means that you need to be comfortable with the possibility of interest rates (and your loan repayments) increasing throughout the duration of your home loan. Lenders are required to assess new loans on your ability to make repayments even if interest rates go up, and also have a “responsible lending” obligation, so they will take care to ensure you can afford your loan in these circumstances based on your circumstances at the time of application.

Fixed

Fixed rate home loans offer you the option of locking in your interest rate for a defined period of time, generally one to five years. As the interest rate is fixed, your repayments are fixed and will stay the same over this period, reverting to a variable rate at the end of the period.

Strengths

The main advantage of a fixed rate home loan is that your repayments stay the same during the contracted fixed rate term, even if the Official Cash Rate increases. Opting for a fixed rate home loan will therefore provide you with a stable mortgage repayment amount during the fixed term period, which is beneficial for budgeting, managing your cash flow and alleviating potential financial stress by planning your finances accurately.

Things to think about

If interest rates decrease, your fixed interest rate won't, which means you won’t benefit from reduced repayments. And while fixed rate home loans offer stability, they may not provide as much flexibility as variable rate home loans. Typically, extra repayments and offset facility balances are limited or capped, and if you decide to switch loans during the fixed period, you may have to pay a break cost fee, which can be expensive. It's important to note that break fees are calculated at the time of requesting a break of the fixed loan, so you should be confident that your circumstances won't change during the specified period of your fixed rate loan to avoid these fees. 

With Qantas Money Home Loans, you can know what your repayments will be and enjoy the flexibility to save on interest payments with the option to add multiple offset facilities to your fixed rate loan. Limits apply⁺⁺. It's important to note that with a fixed rate home loan, fees may apply if the balance held in your offset account exceeds the permitted annual limit.

An offset facility allows you to add money into the account, whenever you want, while also reducing the amount that your interest is calculated on. Offset facilities differ by lender, to find out more read our ‘What is an offset facility?’ guide.

With Qantas Money Home Loans, prepayments of the loan principal and use of the offset facility can impact your annual points eligibility. See the Points Eligibility Policy here.

Types of property loans

Owner Occupied

When you borrow for a property that you plan to live in - either as a new purchase, or to refinance an existing loan - you can apply for an Owner Occupied home loan. This type of home loan is specifically designed for individuals who intend to occupy the property as their primary residence.

Investment

Investment loans are a type of loan you can get when you want to purchase a property for the purposes of financial return (e.g. rental income or capital gain) or to refinance an existing investment loan. 

Owner Occupied and Investment loans don’t offer particular advantages or disadvantages over each other, rather their suitability is based on the type of borrower. Owner Occupiers and Investors may have different financial needs, and therefore may make different choices about the type of repayments they want to make (e.g. Investors may prefer an Interest Only loan, benefiting from lower repayments), and the type of interest rate. If you are looking to invest in property, you should seek independent advice from an accredited qualified financial adviser, and or accountant, to ensure the information and strategies discussed align with your individual circumstances.

Types of repayment options

Principal and interest payments

Principal and interest is the most common type of home loan. This involves making repayments that both reduce the amount you borrowed (e.g. the “Principal”) plus the interest that accrues on the principal.

Strengths

Making principal and interest payments on your home loan can help you pay off your debt faster and increase the equity in your property. Additionally, paying back the principal amount you owe means you'll be charged less interest over the life of your loan.

Things to think about

Your monthly repayments may be larger than if you were to make interest only repayments. 

Interest only repayments

Some people opt for an interest only loan period, which means only the interest accrued is paid, and none of the principal. Lenders will typically limit the amount of time that you can defer Principal repayments (usually 1-5 years), after which you will likely have to switch to a Principal and Interest repayment plan, or refinance to another lender.

Strengths

Opting for interest-only repayments can result in lower monthly repayments during the interest only period compared to principal and interest repayments. This is typically more attractive to investors than owner occupiers, and we recommend that you consult with your accountant or tax professional to understand the tax implications of owning a residential investment property.

Things to think about

If choosing an interest only loan, the interest rate is typically higher than its principal and interest loan equivalent and the principal of the loan will not reduce, which means at the end of the interest only period, you will still need to pay off the full amount of the loan. This means your repayments will be higher when the loan reverts to principal and interest compared to if the loan were principal and interest from the beginning. Ultimately, this might mean that you have your loan for longer and typically you will pay more interest overall over the life of the loan. You should also consider the impact on your finances when interest only term ends, and budget for a change in repayments.

You have to be a Qantas Frequent Flyer member to apply for a Qantas Money Home Loan. This website contains general advice only. This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.

++ Offset facilities: Offset facilities are only available on the Qantas Money Offset Home Loan and Qantas Money Atlas Home Loan for both fixed and variable products. 

Offset facilities must be linked to an eligible Home Loan account and can only be linked to one eligible Home Loan account at any one time. 

Up to 6 offset accounts are available per Qantas Money Offset Home Loan. Linked offset accounts must be in the same customer name/s as the loan account. 

Up to 10 offset sub-accounts are available per Qantas Money Atlas Home Loan. Linked offset sub-account/s must be in the same customer name/s as the loan account. For Atlas Fixed Rate Home Loans, offset funds are limited to $20,000 per annum total across all sub-accounts. Additional funds may be subject to Early Repayment fees. All fees can be found on the fees page.

How to set up the offset facilities may change from time to time, and will be advised during the application process.

This is general advice only. Consider the relevant home loan Terms and Conditions and TMD, and your personal circumstances before you take out this product. Details can be found on the Terms and Forms page.

Complaints about the home loan or offset facilities should be made to the credit provider and provider of the offset facility by emailing: 

• Basic and Offset Home Loans funded by Bendigo Bank: myloan@homeloans.qantasmoney.com

• Atlas Home Loans funded by ColCap Financial: colcap.myloan@homeloans.money.qantas.com