Choosing a home loan can be confusing. We’re here to help.
In this section we demystify home loans to help you decide what home loan best suits your needs.
You need to work out what features will be most important to you.
Decision 1: Should I choose a variable or fixed interest rate?
Or should I split my loan?
The ‘rate’ in question here is your interest rate: this determines how much you pay us for borrowing the money you need to buy your dream home.
You can generally choose to lock in a rate (fixed) or go with the flow (variable). Choosing between fixed and variable (or a bit of both – a ‘split loan’) is one of the big home loan decisions.
Variable rates change over time based on the fluctuations of the financial market and lender pricing. If market interest rates rise, it’s highly likely your repayments will follow suit. On the flipside, if rates drop, chances are you’ll benefit as your repayments may go down.
Why choose variable?
Our variable rate UHomeLoans are suitable for buyers who need repayment flexibility and account features such as redraw.
Fixed rate loans lock-in (or fix) the interest rate you pay for a certain period of time (generally 1, 3 and 5-year terms). Once that period is over, you can choose to fix your rate again. If not, you’ll automatically switch over to a variable rate.
Why choose fixed?
Our fixed rate UHomeLoans are suitable for buyers looking to start off with a straight-forward, predictable and “easy to budget for” loan.
When you take out a fixed UHomeLoan, a fixed rate lock fee of $395 is payable to guard against rate increases between the date of your application and settlement (provided your loan settles within 90 days). This fee is waived for fixed rate loans that settle on or between 10 July 2020 and 30 September 2022. More on fees and charges.
For those of you who want the best of both worlds!
A split loan allows you to divide your total loan amount loan into different buckets, each with a different rate type and/or repayment type.
Here are some examples of why you might decide to split your loan:
Split loans are suitable for people who are looking to take advantage of the security of a fixed rate with the flexibility of a variable rate.
With a UHomeLoan you can have a up to four splits each with a minimum amount of $20,000.
This is the ability to make extra repayments to save money in interest and pay off your mortgage sooner.
If your loan was formally approved on or after September 2013, you can make up to $20,000 in additional repayments during the fixed term.
If you’ve been making additional repayments on your variable rate home loan, redraw allows you to withdraw the extra money down the track. Very handy if you hit a rough patch and need some extra funds on hand.
With a variable rate UHomeLoan, you can easily access cash whenever you wish as long as you’re ahead of your scheduled repayments. Redraw isn’t available on a fixed rate UHomeLoan.
Home loan portability is a feature that allows your current home loan to be transferred from one property to another without the need to pay out and establish a brand new home loan.
UBank only offers Security Substitution in the following scenarios:
 Criteria may need to be met for you to qualify.
If you’re planning on renovating or improving your property, want to consolidate debt or just need extra cash, borrowing more money with your existing home loan may be your best option.
You can borrow additional funds using your existing UHomeLoan, provided you are increasing the loan amount by at least $20,000 and maximum up to 80% of your property’s value (subject to credit approval).
 Click here for more detail on eligibility criteria and the process.
Decision 2: Should I take out a principal and interest or an interest-only loan?
Most home loans are what we call principal and interest loans. This means each repayment goes towards paying off both the initial amount you borrowed (the ‘principal’) and the interest amount.
Why choose principal and interest?
Principal and interest loans are the most popular loan on the market, particularly for owner-occupiers, since they allow you to start paying off your mortgage much sooner.
Interest only means that, for an agreed period, you’ll only be paying off the interest due on your loan. Your repayments won’t reduce the balance (the ‘principal’) of your mortgage. Once the interest-only period ends, unless it’s extended, you have to start making principal and interest repayments.
The interest-only repayment option can only be applied for up to 10 years for investors, and a maximum of 5 years for owner-occupiers, during the life of your UHomeLoan.
Why choose interest only?
Interest-only loans are popular among investors as they maximize any available interest deductions and can free up cash flow for other investments.
Looking for more info? Take a look at the UHomeLoan comparison table for more detail on the types of UHomeLoans UBank offers, their features and if there are any associated fees.
Why a UHomeloan could be ideal for you
Save on fees & interest
We offer competitive interest rates on our variable and fixed rate home loans with no application fees for a variable home loan. Once your loan is up and running, there are no ongoing admin fees for either fixed or variable loans. We offer unlimited, fee-free redraws on variable rate loans.
You can choose between weekly, fortnightly or monthly repayments and make extra repayments whenever you like, without additional fees. You can also split your UHomeLoan up to four splits with a minimum amount of $20,000 per split.
Security & support
When you take out a UHomeLoan you can feel confident in the knowledge that UBank is part of NAB, which has been helping Australians for over 170 years. We always have a local expert here and keen to help whenever you need it.
Need more information?
Or ready to apply?