What is the most common type of loan?

Most home loan borrowers in Australia will need an owner-occupier home loan with principal and interest repayments. Beyond that, investor home loans would be the best option for anyone buying an investment property.

Is a variable rate home loan or a fixed rate home loan better?

Whether a variable rate or fixed rate home loan is better depends on you as a borrower as well as the economic situation. The interest rate on fixed rate home loans won't change for the fixed rate period (between 1 and 5 years). If you want the stability of knowing exactly what your rate is, and therefore how much your repayments are, for that time then a fixed rate might be for you. Bear in mind that when the cash rate goes down you won't benefit from lower rates. There are also normally limits on how much you can make in extra repayments towards a fixed rate loan and additional break costs if you repay early. With a variable rate home loan the interest rate can change at any time. This is great news when the rate stays as it is or when it goes down, but not so great when rates go up. Rates rose 13 times over 2022 and 2023, and borrowers on a variable rate had to cop those rate rises. If you will want to make extra repayments and pay off your home loan early, a variable rate loan will likely have more flexibility for you to do that.

What type of home loan is the cheapest?

Owner-occupier home loans with principal and interest repayments tend to be the cheapest home loans on the market. Investor home loans are slightly higher than owner-occupier home loans. Interest-only home loans are a little more expensive still. When it comes to other types of home loans like construction and low-doc home loans, these rates tend to be more expensive. Although owner-occupier home loans will be the lowest interest rate, that doesn't necessarily mean it's the right one for you. There are always other factors to consider.