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How do I choose a home loan?

There are two main types of home loan - principal and interest loans, where you pay off the loan amount plus interest (the most common type); and interest only loans, where you only pay the interest (popular with investors).

Important things to consider when choosing a home loan: 

  • Interest rate. Try to find a loan with a competitive rate and the features you need - keep reading to find out more. 
  • Loan term. This impacts the size of your repayments and the interest you’ll pay, so aim for the shortest term you can afford. Remember that shorter terms equate to higher repayments, but less interest over the term of the loan. 
  • Fixed or variable interest rate. A fixed rate helps you budget because your repayments remain the same, but you won't benefit if interest rates fall. A variable rate is generally lower than a fixed rate and usually offers more loan features, but your repayments will go up if interest rates rise.
  • Loan features. These include redraw or line of credit facilities and an offset account so you can put extra money into your loan to reduce the interest you pay. Most cost extra, so choose a loan with features you’ll use.
  • Loan fees. These can include application/establishment fees, valuation fees and settlement fees, as well as ongoing fees.

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