Home Loan Definitions for First Home Buyers

For first home buyers, the world of home loans can feel overwhelming. With so many different types available, it’s important to understand the basics so you can choose the loan that suits your needs and lifestyle.

To help make things easier, we’ve broken down the most common types of home loans available to Aussie buyers—and what sets them apart.

A fixed rate loan means your interest rate—and your repayments—are locked in for a set period, usually between 1 to 5 years.

This offers great peace of mind for first home buyers who want certainty around their budget. If interest rates go up, you’re protected. The trade-off? If rates drop, you won’t benefit from the savings until the fixed period ends, when your loan usually rolls onto a variable rate.

A variable rate loan means your interest rate can change with the market. This can be a bit of a rollercoaster—your repayments may go up or down over time.

The upside is that variable loans often come with flexible features like:

• Offset accounts
• Unlimited extra repayments
• Redraw facilities

This flexibility can make it easier to pay your loan off faster—if you're prepared to ride the rate changes.

Can’t decide between fixed and variable? You don’t have to. A split loan allows you to divide your loan into both fixed and variable portions—say 50/50 or 70/30.

This way, part of your repayments are predictable, and part are flexible. It’s a great way to get the best of both worlds. Just keep in mind that switching loans or refinancing later can be trickier with a split structure.

An interest-only loan means, for a set period, you only repay the interest—not the loan amount (or principal).

These loans are often used by investors for tax benefits, but for first home buyers, they can mean lower repayments early on. The catch? Once the interest-only period ends, your repayments will jump significantly, and you’ll have less time to pay off the actual loan. You also won’t build equity unless your property increases in value.

If you have a small deposit (or none at all), a guarantor loan could help. This is where a family member—usually a parent—uses their home equity as extra security.

Your guarantor doesn’t make repayments, but if you fall behind, they’ll be on the hook. With a guarantor’s help, you may be able to borrow more, avoid lenders mortgage insurance (LMI), or enter the market sooner.

Not typically for first home buyers, a line of credit loan works more like a credit card—giving you access to funds based on the equity in your existing home.

You can use it as needed, and only pay interest on the amount you draw down. The downside? It can take longer to pay off your home, especially if you’re dipping into equity regularly.

These loans are for borrowers who don’t meet the usual lending criteria—maybe due to age, credit issues, job instability or being new to Australia.

Non-conforming loans can have higher interest rates and tighter conditions, but they offer a path to homeownership for people who don’t tick every traditional box.

Reverse mortgages are usually taken out by older Australians who want to access the equity in their home.

No repayments are required while the borrower lives in the home, but the interest compounds over time and the full loan (plus interest and fees) is repaid when the home is sold—typically after moving into aged care or passing away.

We’re here to help you navigate the home buying journey—from finance to finding your dream home. Give us a call on (08) 8132 1115 to chat with one of our friendly sales consultants.

Disclaimer:
The information provided here is general in nature and doesn’t take your personal circumstances into account. We recommend speaking with a qualified financial advisor before making any decisions. While we’ve taken care to ensure the content is accurate, Lanser and its employees accept no responsibility for any errors or omissions. See our full disclaimer.