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Handy Home Loan Hints

Fixed vs Variable Interest Home Loans

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Buying a home is an exciting time, and it can be easy to overlook some of the critical features of finding the right loan. One of the biggest decisions to make when getting a new home loan or mortgage is whether to go with a fixed interest rate or variable interest rate mortgage.

When you compare home loans you need to consider your personal circumstances such as lifestyle, budget, cash flow, financial situation, and your contingency plans. Some loans offer flexibility, whilst others provide you with the certainty of a known repayment amount for a period of time. Finding the right home loan can save you thousands on repayments throughout the life of the loan.

What is a fixed interest rate?

A fixed rate home loan is a set interest rate for the fixed term (the agreed time is usually 3 years but can vary depending on the loan provider and what you negotiate). The key feature of the fixed rate is that it does not change during this agreed period, no matter how much interest rates rise or fall.

Advantages of a fixed interest rate

When interest rates rise, the rate does not fluctuate for the agreed period. A fixed rate loan offers peace of mind because you know the repayment will not change until the agreed period has finished. After the fixed rate period, the loan may switch to a variable interest rate unless you make other arrangements with your financial institution.

Many borrowers like fixed rate home loans because it can help with budgeting when you know exactly what your mortgage repayment will be each week, fortnight or month, depending on your repayment schedule.

Disadvantages of a fixed rate loan

When rates fall and stay lower than your locked fixed interest rate you can get stuck paying higher interest than if you were on a variable rate loan.

Ending a fixed rate loan during the fixed term may incur expensive break costs. The formula for calculating a break cost is included in your fixed rate loan contract.

You may also be limited in your ability to make additional payments above your contractual loan repayments.  Some institutions do not offer an offset account with a fixed rate loan. These limitations can reduce your ability to pay off your loan sooner.

Northern Inland Credit Union offers an offset account with a fixed rate home loan.

What is a variable rate home?

Variable interest rates tend to reflect movements in the Reserve Bank cash reference rate. You need to ensure you have a plan of what to do if interest rates rise. A rise in interest rates will often result in an increase in the amount of your scheduled loan repayments, in order to keep your loan within its term.

Advantages of a variable rate loan

Variable rate loans provide far more flexibility than a fixed rate loan. The biggest benefit of variable rate loan is that you do not miss out or 'get stuck' on a higher interest rate when interest rates fall. Additionally, you can usually make unlimited extra repayments, giving you the ability to pay the loan faster. Many financial institutions offer a free redraw facility, so you can draw back on extra amounts you have paid into your loan, above what is required by your normal scheduled repayments, should you need to cover an unexpected cost.

Offset Accounts

An offset account operates similarly to a standard bank account, with the difference being that it is linked to your mortgage.

Whilst your offset account is not interest-bearing, its balance offsets the balance you owe on your loan, and operates to reduce the interest that is payable on your loan. Check the terms and conditions that apply to your offset account; some institutions only offer offset accounts that apply a percentage of your offset balance against your loan balance. At Northern Inland, 100% of the offset balance as at the close of business is offset against your loan balance, for the calculation of loan interest.

An offset account balance reduces the amount of interest you will pay on your mortgage over time. For instance, at Northern Inland where 100% of your offset balance applies to offset your loan balance, if you have a loan of $700,000 and maintain a balance of $50,000 in your account, you will only be charged interest on $650,000 for that day.

Northern Inland offers offset accounts for a number of variable and fixed rate home loans. At Northern Inland, you can elect to have a number of offset accounts linked to your home loan account, to help with your household budgeting.

Lump Sum home loan repayments

Making additional payments or lump sum payments to your mortgage reduce both the interest and principal components of your loan, helping to you to pay off your loan faster.

Generally variable rate loans will allow additional repayments on top of your regular monthly repayments. Fixed rate loans may limit the amount of extra repayments you can make. At Northern Inland, extra repayments of up to $10,000 in any one year is permitted to your fixed rate home loan.

Disadvantages of a variable rate home loans

Between May 2022 and August 2023, the Reserve Bank of Australia raised the cash reference rate 12 times from 0.1 per cent to 4.1 per cent. If you had a variable rate loan during this period, you would have seen your loan repayments increase. Borrowers on a fixed rate home loan would have locked in a lower rate for the fixed period. If you do not have much wriggle room in your budget a variable rate loan can be riskier, but you also need to bear in mind that a fixed rate is generally higher than a variable rate, and you can only fix your rate for a limited period of time.

What is a split rate home loan?

Splitting your mortgage to be partly fixed and partly variable is also an option for borrowers to reduce the associated risks with variable rate loans and fixed rate loans.

A split rate mortgage limits the potential advantages of a fixed interest and the potential advantages of a variable rate loan. However, splitting your home loan is a less risky option for those worried about being on the wrong type of loan at the wrong time. In practice, it involves having two home loans – one with a fixed rate, and one with a variable rate. At Northern Inland, both such accounts can have offset accounts attached. Whilst your repayments to both loans can be automated, borrowers need to consider where to place any spare savings in order to maximise the advantages of the arrangement. 

What if you could have the best of both worlds?

Hybrid loans were more common during the 1990s when interest rates were quite high. Hybrid home loans combine fixed and variable rates.

Northern Inland offers a Capped Home Loan. This loan incorporates many of the benefits of both variable rate and fixed rate loans. With the Capped Home Loan, there is a caped interest rate which applies for a three year period. This means the interest rate will not increase above the capped level for three years. However, it is a variable rate loan, and it reflects the variable rate of Northern Inland’s Dream Home Loan account, which means its rate may reduce during that three year period.

As the loan is variable the interest rate will fluctuate, but you have the peace of mind knowing that it will not increase above a set level. This allows you to budget, knowing that your loan repayments will not increase above a set level for a 3 year period.

animated graph showing the difference between the capped variable home loan and a regular variable home loan

Is it better to have a fixed, variable or capped rate home loan?

Choosing a home loan depends on your personal circumstances, and what you are seeking from your home loan. Matters to consider are:

  • Are you likely to want to make extra payments to your home loan over time?
  • Is certainty of repayments important to you?
  • Is flexibility important to you?

See the Target Market Determinations for the loan account you are considering.

Other factors to consider are:

  • Availability of offset accounts
  • Availability of a redraw facility
  • Any applicable fees. You need to consider whether the costs of moving an existing home loan outweigh the benefits of maintaining your existing home loan.

It is vital that you reassess your home loan regularly to ensure you are making the most of the facilities available to you.

This article is general in nature and does not constitute personal advice. Consider your circumstances and read terms and conditions before making a decision on whether a product suits your needs.

Speak with a Northern Inland home lending specialist about you needs today.


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What is an offset account?

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An offset account is an everyday bank account that is linked to your mortgage, and is sometimes referred to as a mortgage offset account. Offset accounts work by 'offsetting' your savings balance against your loan balance. Your loan interest is calculated on the remaining outstanding balance of your loan account.

How does an offset account work?

Offset accounts bring down the interest payments by reducing your home loan balance with the money in your offset accounts. Offset accounts are usually only available with eligible variable rate home loans.

Your home loan repayments are made up of two components:

  1. Principal - this is the amount you borrowed.

  2. Interest - this is the amount calculated based on the balance of the principle still owing.

The interest component is the only part of the repayments affected by an offset account.

In addition to these two components, you may have account keeping fees or ongoing home loan associated fees.

You need to check the terms and conditions of an offset account, as to when the institution calculates the interest on your loan, and applies the offset benefit. At Northern Inland, your offset account balance as at the close of business every day, is used to calculate your offset benefit, and accordingly, the interest that will be charged to your loan account at the end of the month. 

Potential interest savings using an offset account

If you borrow $150,000 and maintain a balance of $10,000 in your linked mortgage offset account you will only pay interest on the $140,000 balance for that day. Note: interest on your loan is calculated daily.

Without an offset account

The following examples are for illustrative purposes only: it is quite unlikely that a variable interest rate would remain the same for the entire term of a loan. Other costs, such as account keeping fees, have been excluded for the purpose of the examples.

Assuming an interest rate of 7.34% that does not change for the entire term of your loan, your regular monthly repayments would be $1,092.92 which is approximately $177,877 in interest to be paid over the 25 year loan term.

Graph displaying interest payable on a home loan without an offset account

With an offset account

Assuming that the home loan interest rate with a linked offset account is also 7.34% for the entire term of your loan, and you maintained a constant $10,000 balance in your linked offset account you would pay off the loan in 21 years and pay approximately $134,299 in interest payments.

This represents a saving of 4 years and loan interest saving of approximately $43,577!

This scenario assumes that the variable interest rate and account balance remain the same over the life of the loan. It also doesn't take into account any fees associated with the loan.

Home loan repayment graph with an offset account reducing interest payable

Key benefits of an offset account

Reduce the amount of interest that is calculated as payable on your loan account by maintaining your savings in an offset account.

Your money is at call, with a full range of access methods.

Whilst your offset account is a non interest bearing account (that is, it doesn’t earn interest), it operates to help you save on the interest you would otherwise pay on your loan account.

To maximise the benefit of your offset account, you should aim to keep all your savings in an offset account.

At Northern Inland, you can have up to X offset accounts linked to your loan account, to assist you with budgeting and other household bill payments. 

Consider the Target Market Determination, and Product Fact Sheet, to see if an offset account suits your needs. Speak to your accountant or financial planner for personal advice.

What are the disadvantages of an offset account?

Often, offset accounts are usually only available with variable rate home loans, most lenders do not offer offset accounts on fixed rate home loans. For a full comparison of home loan types see our fixed vs variable home loans article.

However, Northern Inland does offer a fixed interest home loan with a linked offset account, see loan option here.

The interest rate on a home loan with a linked offset account may be higher than the interest rate on a non linked mortgage. The account keeping fees also may differ. Speak with the lender about different rates they can offer on each option to see what suits your circumstances.

Consider the Target Market Determination, and Product Fact Sheet, to see if an offset account suits your needs. Speak to your accountant or financial planner for personal advice.

Can I offset 100% of my mortgage?

Yes, in most cases you can. Full offset accounts mean you only have to pay back the loan principal for the remainder of the loan if you keep it fully offset.

Example: If you have a mortgage balance of 100,000 and you have $100,000 or more in an offset account you have effectively prevented paying interest on the loan balance.

At Northern Inland, please note that you would still be required to make your regular loan repayments, which include any monthly account keeping fees.

Whilst a complete offset may be technically possible, you should speak to your accountant and financial planner as to whether it is in your interests to do so.

Check with your financial institution as to what percentage of your offset account balance, is offset against your loan account balance for the purposes of interest calculation. At Northern Inland, 100% of your offset account balance offsets your loan account balance, as measured at the close of business.

In what name can an offset account be established?

At Northern Inland, an offset account must be in the same name as the borrower. If a loan is in joint names, the offset account can be held in joint names or in each of the individuals names. However, if a loan is in a single name offset accounts cannot be established in joint names. Offset accounts cannot be opened where the account is in a different name, such as a company or in a relatives name.

Additional ways to maximise your offset account balance

The more money you are able to maintain have in your offset account, the less interest you may be charged on your loan account. At Northern Inland, interest is charged on a daily calculation as at the close of business.

You may wish to consider how you access your offset account balance, and how you pay expenses, to maximise your offset account balance.

Investigate payment options with your various providers. Some will allow you to pay by the month (or more frequently) by way of direct debit. Some may charge for this option. Ensure you have all the relevant information regarding your options, and any associated fees, before you make a decision.

Using a credit card

Credit cards usually have a 30 day interest free period, which you can use to your advantage.

If you buy everything using a credit card and leave the repayment as late as possible to pay the account in full, you will have maximised your savings balance in your offset account to the benefit of reducing the calculated interest on your home loan.

If you are considering this as a budgeting strategy, please bear in mind:

  • You need to repay the balance of your credit card in full by the due date or you will incur interest on your credit card account

  • You should look at automating your payment to your credit card to ensure you do not miss the due date.

At Northern Inland you can set up an automated repayment for the balance of your Visa Credit Card, to make sure your payments is made on time.

Consider the Target Market Determination, and Product Fact Sheet, to see if a Visa Credit Card suits your needs. Speak to your accountant or financial planner for personal advice.

Is it better to have money in offset accounts or savings account?

When deciding whether to use an offset account, consider:

  • When you earn interest on a savings account, the interest is income and is reported to the Australian Taxation Office. It is included in your tax return

  • An offset account is not an interest bearing account. For the purposes of interest calculations on your loan account, it acts to reduce the outstanding balance upon which the interest is calculated

  • The respective interest rates on your savings account, and on your loan account.

You should always seek advice from your accountant or financial planner, which takes into account your personal circumstances, before making a decision.

What's the difference between redraw facility and offset facility?

With an offset account (offset facility) you make all of your money work for you because whatever you have in your account offsets your loan balance for the purpose of loan account interest calculations.

There are other options to reduce the interest you pay on your home loan which offer less flexibility but have fewer of the drawbacks of an offset facility.

Additional repayments

You can bring your loan balance down by making additional repayments on top of your regular repayments with eligible home loans. This can help you pay off your home loan faster without needing an offset account.

This is a home loan feature that can help you save on interest by adding extra funds directly to your mortgage.

What is a redraw facility?

A redraw facility allows you to redraw money from your mortgage if you have made that are additional repayments and are in advance on your home loan. Some lenders charge a fee for redrawing on your loan or they have a minimum redraw amount.

Which is loan type is better?

There is greater flexibility with an offset account compared to a basic home loan with additional repayment and free redraw facilities.

You should consider flexibility and the differing interest rates offered between a home loan with offset facility and without offset facility.

When should I use an offset account?

Having an offset account is best when you have a substantial balance in your account. The benefits of an offset account are limited if you have small daily balances in your offset account.

If you have large sums coming in and out of your account regularly, an offset account can benefit you significantly because you get the benefit while the money is in the offset account at the time when loan interest is calculated. At Northward Inland, this is at the close of business, daily.

Is an offset account worth it?

An offset account can save money by reducing your interest costs, interest paid over the life of a loan can be significant. It can help pay off your home loan faster too!

When comparing to other loan types you should consider all components of the loan, interest rates, fixed or variable interest, fees, comparison rate, redraw facility and the flexibility it provides you. Different home loans suit different circumstances.

Speak with one of our Lending Specialists to see which loan type suits you best, contact us.

This article is general in nature and does not constitute personal advice. Consider your circumstances and read terms and conditions of the Product Fact Sheet, and Target Market Determination, before making a decision. Always speak with your accountant and/or financial planner for personal advice which is tailored to your circumstances.

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Here is how to prepare for an interest rate rise on your home loan.

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Home loan rates are rising again. This means that borrowing money will become more expensive. But there are steps you can take to reduce the impact on your finances.

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Read more: Here is how to prepare for an interest rate rise on your home loan.


Making your first home loan easy

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Finding the right home loan is a daunting process. Read how Kieran and Rebecca found their home loan journey with NICU to be simple, easy and highly personable.

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Read more: Making your first home loan easy


Buying your first home - A complete guide

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Buying property can be one of the biggest decisions of your life, especially if you are a first time home buyer. Home ownership is the Australian dream. Purchasing your own home is a huge step so make sure you are equipped with all the knowledge needed to make the right decisions. We have put together a comprehensive guide to help with everything from your property search, to property value and property prices through to the property purchase, and everything else in between.

Understanding the property market

Understanding the property market is very important initial step. Research recently sold properties and the median house price in the areas you are considering. Explore what an established property offers compared to house and land packages.  You might even attend a few auctions to see how they work.

If the buying location you desire is in high demand, this usually means there are not many houses for sale, which results in higher prices. What you get for your money may be less than you anticipated. When there are plenty of houses for sale and not as many buyers, prices may be lower. You could pay a reasonable price and get great value for money in this market. Talk to your local real estate agent to get an understanding of what is happening in your preferred localities.

Real estate aggregator sites such as and help you see how many houses are currently available and their price ranges.

Understanding your situation

To narrow your ideas on what your perfect property looks like, ask yourself these questions:

  • What is the purpose of the property?
  • Do you just want to get into the property market?
  • Are you going to live on the property, or is it an investment property which you will rent out?
  • How long do you intend to stay in the property?
  • What is your 5 year plan?
  • What is your exit plan if your circumstances change?

Lending specialists will ask these questions, so it helps if you’ve already thought them through. The answers may influence the size, quality, location and price tag of your property. They may also influence the structure of your home loan. Your circumstances will also influence whether you wish to have an offset account, or a redraw facility, and whether you opt for a fixed rate home loan, or one with a variable interest rate.

Are your circumstances / family circumstances likely to change?

Your plans for the future, and how long you intend to keep the property, influence what you need in terms of dwelling size, number of bedrooms, bathrooms, and yard size. Because your plans may affect your future capacity to repay the loan, responsible lending specialists need to ensure that your future plans don’t put you in a position of financial hardship if your current circumstances change.

If you wish to start a family, or take time off for full-time study, you might find the security of a fixed interest rate and fixed repayment amounts suits your needs. Alternatively, if you are planning on starting a family, you may wish to pay extra towards your home loan now, so that you can reduce down your repayment amount whilst on parental leave.

Protecting yourself against the unexpected

You never know when something can go wrong. Accidents and injuries, health problems, or unemployment can affect your ability to make your home loan repayments. Personal risk insurances (income protection, trauma, permanent and total disability) can be arranged to replace part of your income should such an event occur. We can refer you to a financial planner to discuss these options. Keeping your new home covered with general insurance is a requirement of your mortgage. We can arrange no obligation comparison quotes by our principle insurer for building and contents insurance.

Seek professional advice with a qualified financial planner to cover all bases. It is never too early to review your current situation and plans for the future. Ensure you are set up to maximise your investments and make the smartest decisions with your money.

Questions to ask real estate agents

How long was the vendor (seller) at the property and why is the vendor selling?

Sometimes vendors need to relocate for work, down-sizing, or up-sizing if they have a growing family. Consider if the vendor's change of circumstances is something that is likely to occur for you in the near future. For example, your need for proximity to schools and workplaces, and the availability of public transport.

Does the property have any issues?

Make sure you obtain your own building and pest report. Consider the age and condition of dividing fences, and isolation pool fencing (if any). Some vendors will make available the last pest inspection they have for the property.

Can I look at a contract?

Whilst your solicitor or conveyancer will assist you with the intricacies of the contract, simple things you can look at, which may affect your ideas about the property, include: flood zoning, zoning of the property itself which may affect your use of it, connections to town water and sewerage, availability of independent water sources (eg bore and tank).

What is included and excluded from the sale?

This should be included in the contract, if available. Ask about particular fixtures you like, as they may not be included with the sale. Sheds, garden furniture and clothes lines may not be fixed to the property. Where NBN is available in the area, it may not be connected to the property.

How long has the property been on the market?

Sometimes properties may be slow to sell if their price is not quite right. Consider whether the price of the property has been reduced over time, and whether it has taken into account the costs of services and rates for the locality.

Can you show me a recent property sales report?

A sales report compares similar properties within an area. It can indicate whether the property is spot on for price, and whether properties are in demand for the area.

Have any offers been made?

This tells you whether you may be competing with other interested parties. It can indicate whether you need to make a higher offer.

What is the minimum price the vendor will consider?

You need to know if your offer will even be considered, before you can consider whether you can afford to increase it. Responsible lenders will gauge your borrowing power for you, so you know where you stand.

Are there development applications before Council?

You should also check this with your local Council before making an offer. Some changes to neighbouring properties can affect your views or increase traffic or noise.

Government incentives to help first home buyers

First Home Owner Grant (FHOG)

The First Home Owner Grant (FHOG) scheme was a government incentive introduced to offset the effect of the GST on home ownership. Under the scheme, a one-off tax-free grant is payable to first home owners who purchase new dwellings or build. Knowing whether you’re entitled to such a grant can boost your deposit significantly. General eligibility requirements include:

  • The property must be a brand-new home
  • Borrowers are over 18 years of age, are permanent residents or citizens, and have not held a relevant interest in any Australian residential property before 1 July 2000
  • The value of the property must not exceed the FHOG (this varies between states and territories)
  • You have not received a FHOG in any state or territory, unless subsequently repaid
  • You need to live in the home for a continuous period of at least 6 months.

These requirements may be subject to change so check out the guidelines for each state at

First Home Super Saver Scheme

The First home super saver (FHSS) scheme was introduced to reduce pressure on housing affordability. The scheme allows you to save money for your first home inside your superannuation fund by making voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super fund to save for your first home. This helps you save faster with the concessional tax treatment of superannuation. Consider the full details on eligibility and benefits of the FHSS, learn more at

Buying property with other people

Buying with a partner

If you are buying your property with someone else you should be aware of the different ways in which the property title can be held, how ownership works and who is responsible for the loan should there be a default, or should one of the parties pass away.

Joint Tenancy

This involves two or more persons holding ownership of the property at the same time. If one party passes away, ownership of the property passes to the survivor. Where the property secures a loan under a mortgage, responsibility for the debt passes to the survivor. Where the parties separate, both parties remain responsible for the loan until it is refinanced into one name, or the property is sold.

Tenants in Common

This titles is often used where the property is for an investment purposes between a number of different parties. Each party owns a proportion of the investment property. The proportion may be equal or divided according to how the property was purchased. For example, two people may own 50% each, or four people may own 25% each, or one person may own 30% and the other two parties 35% each. It depends on how the purchasers wish to apportion ownership.

Where the property title is taken as security for lending, all persons on the property title are equally responsible for the loan. This means that even if your investment partner who owns 70% of the title is defaulting on the loan, you remain equally responsible for paying off the entire debt.

Tenants in common titles allow people to jointly invest in property, but in the case of death, the property doesn’t automatically pass to the other parties. As to ‘who gets it’? this is specified in your Will. Discuss any concerns with your legal advisors.

Hidden costs of buying property

A property’s price tag is not the only cost to consider when buying your first home. There are additional costs that make up the full purchase price:

  • Property inspections (building and pest) costs: it is highly recommended that you have these standard checks carried out by licenced inspectors to ensure the property is structurally sound and pest-free. These are upfront costs which you will not recoup if you do not purchase the property. These inspections are vital when buying and established home.
  • Loan application fee: a fee to process your application. Ask what it covers, as valuations are often excluded.
  • Property valuation fee: a valuation report is required by responsible lenders to evidence that the value of the property is sufficient to support the amount being borrowed.
  • Solicitor/conveyancer fees: these costs relate to licenced individuals carrying out any legal work involved with purchasing your property. This includes obtaining searches from government bodies and third parties which tell you of certain issues with the property. Your solicitor or conveyancer can advise on the searches that are appropriate for your property. For example, a land tax certificate is relevant for all properties, whereas a strata search is only applicable to apartments.
  • General insurance and rates: as owner of a property subject to a mortgage, you have an obligation to insure the property, and to keep council rates paid up to date, and pay strata fees if you are moving into an apartment.
  • Stamp duty: this state tax is payable when transferring ownership of a property. The percentage varies between states. In some cases First Home Buyers are exempt. See guidelines for each state:
  • Mortgage registration fee: your state registry responsible for maintaining the records of property ownership imposes an administrative fee for registering a change of property ownership and for noting the mortgage against the property.
  • Utility connection costs: providers of electricity, gas and telecommunications often impose a connection fee for your new property, and a disconnection fee for your former home.
  • Moving costs: factor in removalists, and postal redirection.

These costs can add thousands of dollars on top of the property's purchase price.

Borrowing money to purchase your new home

Borrowing power is based on your current financial circumstances including your current income, expenses, assets and debt, plus the amount you have saved for a deposit. Your borrowing power is determined by your ability to make the mortgage repayments comfortably, calculate what you can borrow with our borrowing power calculator.

Can I get pre-approval?

Pre-approval gives you a good understanding of the amount you may be able to borrow, based on your current financial status, and subject to certain conditions. It's a good starting point which allows you to house-hunt. Often real estate agents will ask for evidence of your borrowing power, and Northern Inland provides you with a letter which is good for 90 days provided your circumstances do not change.

Do I need a deposit?

A deposit of 20% of the purchase price plus enough to cover ongoing costs is ideal. Some contracts of sale may specify a different amount. The bigger your deposit, the lower your loan to value ratio (LVR) will be. This is the amount of the loan divided by the purchase price (or appraised value) of the property.

Most lenders will accept a 10% deposit or even a 5% deposit of the purchase price. A lower deposit will increase your mortgage repayments and you'll have to pay lenders mortgage insurance for deposits less than 20%.

Paying lenders mortgage insurance

If you have a 20% deposit or greater (LVR of 80% or less), you will avoid paying Lenders Mortgage Insurance (LMI). If your deposit is less than 20% of the property purchase price then you will have to pay LMI. This protects the lender, not the borrower.

By establishing good savings habits, not only can you save your deposit faster, but it shows lending specialists that you know how to budget and plan for the future. Set up a dedicated interest-bearing account so that you can make regular deposits each time you get paid. Northern Inland can help you automate this payment.

First Home Guarantee (FHBG)

FHBG (formerly known as First Home Loan Deposit Scheme) is a government initiative designed to help low and middle income earners enter the property market. Under the scheme an eligible home buyer can buy a home with as little as a 5% deposit and not have to pay LMI because the Australian Government guarantees up to 15% of the value of the property, for more information see

What is a guarantor loan?

If you do not have a 20% deposit you can have a parent or family member become a guarantor for your loan and you won't have to pay LMI. The guarantor needs to have a home loan with sufficient equity to be your guarantor. If the borrower defaults on their loan repayments it can fall on the guarantor to take over the repayments. Legal advice before providing a guarantee is strongly recommended.

What does a mortgage broker do?

Generally you have two options when buying your new house. You can take out a home loan directly through a credit union or bank, or you can go through a mortgage broker. A mortgage broker is essentially a middleman who will provide you with home loan options from multiple credit unions or banks and refer you to the one you choose. Mortgage brokers are paid by the credit union or bank if a referral leads to a home loan.

The borrower’s relationship with the mortgage broker generally ends after a decision is made. (Wayne would say it doesn’t)

Choosing a home loan

Like any product, home loans come in all shapes and sizes. The right one for you will depend on a range of factors and eligibility criteria including whether you want the certainty of a fixed interest rate, or the flexibility of a variable interest rate where you can pay extra toward your loan, and how you like to access your savings and make transactions generally.

  • Fixed interest rates: a fixed rate home has the interest rate locked in for a specific period of time, usually 1 to 5 years. As your interest rate doesn’t change during your set period, your repayments remain the same, which can be handy for budgeting. If interest rates increase, your loan and its repayments are not affected. If interest rates drop however, you miss out on paying less interest. There can also be expensive break costs and limits on extra repayments to take into consideration.
  • Variable interest rates: a variable interest rate can increase or decrease during the course of your mortgage. Accordingly, your required repayment amounts could increase: responsible lenders will give you advance warning in writing if this applies to your loan. Before committing to a variable rate home loan it’s worth thinking about whether you can maintain the repayments if the interest rate increases significantly. Responsible lenders factor in some level of increase when assessing your credit application.
  • Interest only: a method of temporarily reducing your repayments is opting for an interest only loan, which requires payment of only the loan interest each month, and no repayment of principal, for a set period. This is often used for homes being constructed, up until the time you are able to move in. Interest-only loans are not a long term option.

For an in-depth comparison of fixed and variable loans see our fixed vs variable interest home loans article.

Extra repayments and redraw facility

Loans with a fixed interest rate have limitations on the amount of extra repayments you can make during the fixed rate period, whereas variable rate loans often allow extra funds to be paid at any time. Where the calculation of your interest is made daily on a variable interest rate loan, there are interest rate savings if you can pay extra. A redraw facility means that you can access those extra funds you have paid to your loan, above what is required under your loan contract. This can be helpful if you have unexpected expenses, like the need to replace white goods, or vehicle repairs.

Added extras

Loan types range from basic loans with a low rate and no extras, through to full packages with additional benefits such as offset accounts, waiving of fees, discounts on other products, rebates on transaction fees or even cash back promotions. It is important to weigh up the true, cost compared with your needs. How you like to access your funds and make your payments often dictates whether the added extras will be of benefit to you:

  • Mortgage Off-set accounts: work to reduce the amount of loan interest you pay. If you are a disciplined saver and spender, then leaving all your available funds in your Offset account can make a big difference to the loan interest that you have to pay.
  • Discounted rates on credit cards: Northern Inland offers a discounted rate on your Northern Inland Credit Card which applies for the life of your home loan. If you are disciplined in your credit card use, save even more on your home loan interest by paying your bills on your credit card, then paying your credit card balance in full each month from your loan offset account.
  • Fee-free transaction methods: Northern Inland provides free online banking, mobile app transactions. If you can limit your need for cash, cheques and over the counter services, you can transact fee-free.
  • Flexible repayments: Northern Inland lets you select to make weekly, fortnightly or monthly repayments, and automates the payment to tie in with your pay day.

Comparison rates

This is an indicative interest rate that is designed to help you compare loan accounts. It includes the loan interest rate, and any fees that are known at the time the loan is being accepted, such as establishment fees, and monthly account keeping fees, to express the true cost of a loan into a single rate, over a 25-year term. It does not include fees that are contingent on a future event that is not discernible at the time a loan account is established, such as costs associated with redraw, progress payments or early repayments. Government and statutory charges are also excluded.

The 8 step home buying process

Buying a home is an exciting time, it can be overwhelming for first home buyers, our lending specialists are here to help you.

Step 1 - Home loan application

Gather evidence of your income, details of your assets (what you already own, such as your last superannuation statement), your debts and expenses. Generally, lenders will require:

  • 3 recent payslips or your last two tax returns if you are self employed
  • Quarterly rates notice or rent receipt, depending on whether you already own a home or you rent
  • Evidence of any other income, such as Centrelink letters
  • Credit and store card statements
  • 6 months’ worth of bank account and loan account statements, and any Buy Now Pay Later arrangements you have in place.

Step 2 - Assessment

We’ll need to verify your identity, income and carry out a credit check. If you are already a Northern Inland Member we’ll already have a lot of this information.

Step 3 - Pre-approval (or conditional approval)

Providing you have given us all the required supporting documents, we can provide you with a measure of your borrowing power, often within 24 hours. We provide a pre-approval letter which outlines the amount which you have been approved to borrow in principle, providing there is no change to your circumstances in the next 90 days, and subject to your chosen property meeting certain conditions. From here you can house hunt with confidence!

Step 4 - House hunting

Open houses here we come! Get excited and take your time to find the one that suits you and your needs.

Step 5 - Make an offer

Liaise with the real estate agent to make an offer on the property.

Step 6 - Inspections and reports

When you find the right property, let us know so we can assist you to obtain a valuation. Your solicitor/conveyancer can often help recommending providers of pest and building inspections.

Step 7 - Exchange of contracts

Loan contracts are exchanged with the assistance of your solicitor/conveyancer, and your deposit is paid. Additional searches and certificates are generally ordered at this time.

There may be a cooling off period where the buyer may change their mind about the purchase even after the contracts have been signed and exchanged, this varies from state to state.

Step 8 - Settlement

The settlement period is usually 6 weeks after the contracts have exchanged, with the final day referred to as the 'settlement date'. This is the final step in the property buying process – the loan is funded and keys provided to the proud new owners. Time to celebrate!


This article is general in nature and does not constitute personal advice. Consider your circumstances and read terms and conditions before making a decision on whether a product suits your needs.

Speak with a Northern Inland home lending specialist for help with buying your first property, contact us.



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