Choose the right home loan

I'd recommend reading this even if you find home loans about as exciting as watching paint dry. With years of repayments ahead, it pays to understand what you're signing up for. Start with what you can comfortably repay, then compare the rate, fees and features you'll actually use.

A mortgage broker can do that comparison across a panel of lenders and explain why one loan fits your situation better than another. Yes, I'm a broker, so you'd expect me to say that. But the useful part is having someone check the whole loan, including how the bank treats your income and deposit, before you apply. Our mortgage broker vs bank guide explains how we help.

A lender's maximum loan amount is only one part of the decision. Work backwards from a repayment you can live with, allowing for insurance, rates, maintenance and the expenses you still want room for. Leave some breathing space if repayments rise or your income drops.

Talk to us before you get too far into the property search. A pre-approval can help establish a price range, but it is conditional. The lender still needs to accept the property and meet its final approval requirements. Don't treat it as finance already secured when signing a contract.

The purpose matters because it can affect the lender's assessment, pricing and loan structure. Tell your broker how you intend to use the property and the money. If you plan to rent the home out later, raise that before settling on the loan setup.

A fixed rate stays the same for an agreed period, commonly one to five years. A variable rate can move up or down when your lender changes it. A split loan combines the two. You don't have to predict the next rate decision to make a sensible choice; think about the repayments and flexibility you need.

If you expect to put bonuses or other lump sums into the loan, look closely at extra-repayment limits. If you need certainty for the household budget, fixing some or all of the balance may be worth considering. A split can leave a variable portion available for extra repayments while fixing the rest. There is no split percentage that suits everyone.

Before fixing, ask what happens at the end of the fixed period and whether a rate-lock fee applies before settlement. Our fixed interest rate guide goes into that decision in more detail.

For lender-specific detail, compare our Westpac home loan review, NAB home loan review and ANZ home loan review. Each covers the loan features and lending considerations to check before applying.

With a 100% offset, the money in the linked account reduces the balance used to calculate interest. For example, a $500,000 loan with $20,000 in its offset is charged interest on $480,000 while those balances stay the same. The savings remain in the account rather than paying down the loan itself.

Compare the expected interest saving with any account or package fees and any higher loan rate. An offset is less useful if you expect to keep very little money in it. Our offset account guide explains how to weigh that up.

Redraw lets you access eligible extra repayments already made into the loan, subject to the lender's rules. Check the amount available, minimum withdrawals and access conditions. It works differently from a separate offset account, even though both can help reduce interest.

Principal and interest repayments reduce the amount you owe as well as covering interest. An interest-only period leaves the principal unpaid, so repayments can rise when that period ends. For a home you plan to live in, understand why interest-only is being proposed before accepting the lower starting payment.

Compare quotes using the same loan amount, repayment type and term. A longer term can lower the monthly payment while increasing total interest. Ask for a personalised Key Facts Sheet and a dollar comparison of upfront fees, ongoing fees and repayments. Check how long any introductory discount lasts.

The advertised comparison rate combines the interest rate and certain fees using a stated loan amount and term. It is a starting point, not a personalised quote. Ask us to compare the actual cost for your borrowing amount, including any features you want and the cost of switching later.