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Which home loan is right for me?

Get the basics right and it's happy house-hunting. Photo: Getty
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Not only are there hundreds of loans to choose from, some are marketed using names and descriptions that don’t really say much about the loan and how it works.

The thing is, home loans are a pretty straightforward product and there is really only a limited number of variations. Let’s nail the basics and see what’s involved.

Variable rate loan

This is the most popular choice of home loan. The interest rate you pay can vary up – or down – in line with market rates. That means your monthly repayments can also change over time.

Fixed rate loan

The rate you pay is locked-in for the period you choose – usually one, three or five years with most lenders (although ME offers fixed terms anywhere from one-seven years).

By fixing your rate, your monthly repayments stay the same, regardless of movements in market interest rates. When the fixed period ends your loan reverts back to a variable rate.

Why choose a variable rate when a fixed rate offers certainty?

Good question. A fixed rate makes budgeting easier and you’re protected against possible rises in interest rates. On the downside, fixed rate loans tend to be less flexible – and there’s always the possibility that rates could fall, leaving you paying a higher rate.

First-home buyer tip

If you’re not sure whether to go fixed or variable, ME’s Flexible Home Loan gives you the option to split your loan between fixed and variable rates. You benefit from the certainty of a fixed rate plus the flexibility of a variable rate.

Basic loan or more features?

If you’re looking for a low variable rate, ME’s Basic Home Loan could be the solution. We haven’t scrimped on features though – you save even more with fee-free extra repayments and redraw.

If you’re looking for more features, including a fixed rate option, ME’s Flexible Home Loan offers the freedom to customise your loan to suit your needs.

Not sure which way to go? Compare our loans side by side.

First-home buyer tip

Don’t just look at the loan interest rate – be sure to check if fees apply as these can quickly stack up. ME home loans let you save with $0 application fee and $0 account-keeping fees*.

Pay off your loan sooner

Paying more off your loan is a simple way to clear the balance sooner and save a bundle on interest. However, you might still want some flexibility to access your extra repayments when needed. Two quite different loan features help you do just that.

Redraw lets you withdraw any extra repayments you’ve made on your variable rate loan, so you can pay off the loan sooner, knowing you have back-up cash to cover any unexpected bills.

Offset can be a smart way to use spare cash. The balance of your ME Everyday Transaction Account is deducted from (or offset against) the balance of your variable rate Flexible Home Loan when monthly interest is calculated.

If you have, say, $10,000 in your ME Everyday Transaction Account and a $400,000 variable rate loan, the interest cost will be based on a loan of $390,000. Your regular repayment stays the same but, as the interest component is reduced, more of each payment goes toward paying off the loan. Meanwhile, you have at-call access to your money.

Which is better offset or redraw?

Every extra payment, no matter how small, helps you save on interest and pay off your loan sooner. That makes fee-free redraw a must-have feature, and that’s why it’s part of ME’s Basic Home Loan.

Offset can work best when you have a reasonable balance in your ME Everyday Transaction Account. We understand that cash may be tight when you buy your first home but things won’t stay that way for long, and an offset account could really put you ahead with your loan over time.

Your ME Mobile Bank Manager can help you decide which type of loan, and loan features, are best suited to your needs.

Want to know more?

Find out about choosing the property that is right for you here.

Terms, conditions, fees and charges apply. Applications are subject to credit approval. Members Equity Bank Limited ABN 56 070 887 679 Australian Credit Licence 229500. 21568/0515.

*Valuation and agent fees may apply.

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