There are many options when choosing a home loan – hundreds, in fact.  Given the wide range of loans on offer – with different interest rates, product features and fees – it pays to do your research to find the loan that fits your needs and circumstances.

Your first choice will be between a fixed interest rate and a variable rate. A fixed rate gives you certainty - for a time - in budgeting to make the repayments, because you know the regular repayments won’t change for a fixed period, no matter how market interest rates move.

A variable-rate loan means the interest rate may change because of economic conditions loosely in line with the official interest rates set by the Reserve Bank of Australia.

The obvious risk with a variable-rate loan is that if interest rates rise, the amount of your monthly repayment rises with it - and it may start to push the boundaries of what you can afford. The other side of the coin is the bonus of lower repayments if interest rates fall.

The most popular home loan is the standard variable rate loans, which offers quite a bit of flexibility: depending on the lender, you could be offered a low introductory interest rate, or the option of paying extra. Thus, every month, if you pay an extra amount on top of your minimum payment amount, you can repay the loan faster, and the extra money is offset against your loan to reduce the interest you pay.

Some standard variable loans give you the option of redrawing the extra money you’ve paid back, if you need it.

Some lenders offer the best of both worlds, with a ‘split’ loan that combines fixed and variable rate portions in one loan. This gives the borrower a bit of repayment flexibility along with some interest rate security.

In a split loan you can access variable loan features like redraws and extra payments but have a little bit more certainty around your long-term budget. Most lenders will let you set the portions to best suit your circumstances.

While most home loans are principal and interest loans, where you make regular payments against the principal - the amount borrowed - as well as paying interest, there is the option of using an interest-only loan. Paying only the interest on your loan doesn’t reduce the principal, but many property investors like this form of loan because it minimises their repayments, while hopefully their property is increasing in value: the investors are prepared to forego gaining equity in the property because they’re banking on the rise in value.

As always, shop around for a home loan that suits you. Compare interest rates, product features, and fees and charges, to work out which loan offers the best value.  You could also consider using a mortgage broker.  A mortgage broker will take time to understand your circumstances, and source the best interest rate and features to suit your needs.