Different Types of Mortgage in Australia

There are many different types of mortgage products in Australia, and it’s not always obvious which one will be right for you. When comparing home loan types, it’s important to make a decision based on your personal circumstances – not just what worked for someone else.

While friends, family and colleagues might happily share their mortgage stories, their experience is usually limited to their own situation. They may know which mortgage types suited them when they applied, but your financial position, goals and timing are probably very different. And Australia’s interest rate and property markets have also shifted significantly in the last few years.

So, how do you make a smart financial decision? The first step is to get a clear understanding of the different types of mortgage Australia offers – and then match those options to your own goals.

Types of Mortgage Available in Australia

There is a diverse range of mortgage types Australia has on offer, designed to cater to different borrowing needs. Common types of mortgage include:

• Fixed and variable rate mortgages – Traditional home loan types where your interest rate is either set for a period (fixed) or can move up and down with the market (variable).
• Interest-only mortgages – Let you pay only the interest for a set period, reducing repayments in the early years.
• Loans with offset accounts – Your savings are linked to the home loan, reducing the balance you pay interest on.
• Package loans – Bundle your home loan with other banking products (like credit cards and transaction accounts) for potential discounts and fee waivers.

On top of these core types of mortgage, many lenders offer extra features such as:

• The ability to make extra repayments
• Redraw facilities
• Multiple offset accounts
• Split loans (part fixed, part variable)

This variety of home loan types makes it easier to tailor a loan to your needs – but it can also make comparing all the mortgage types in Australia feel overwhelming. That’s where a good mortgage broker can help.

Mortgage Products: Fixed vs Variable

While there are hundreds of types of mortgage products on the market, most home loans fall into one of two main categories:

• Variable-rate home loans
• Fixed-rate home loans

Understanding how these key types of mortgage work – and how they behave as interest rates move – is essential before you choose a lender.

Variable Rate Mortgage

Also known as variable-interest mortgages, these mortgage types come with an interest rate that can move up or down, usually in line with changes to the Reserve Bank of Australia (RBA) cash rate.

• During the pandemic, the RBA cut the cash rate to a record low of 0.10% in November 2020, which flowed through to very low variable home loan rates.
• From May 2022 to November 2023, the RBA lifted the cash rate from 0.35% to 4.35%, pushing variable home loan repayments sharply higher.
• Since early 2025, the RBA has begun easing rates, and as at November 2025 the cash rate sits at 3.60% after several cuts.

This shows how sensitive variable home loan types are to economic conditions:

• When rates fall, your minimum repayments can drop, and you might get ahead by keeping your repayments at the old (higher) level.
• When rates rise, your repayments increase, so you need enough buffer in your budget to absorb those changes.

If you’re considering variable types of mortgage, it’s important to ask:

• Could I still afford repayments if rates went up by 1–2%?
• Do I want the flexibility to make unlimited extra repayments and access redraw?

Fixed Rate Types of Mortgage

A fixed interest mortgage is another major type of mortgage where your interest rate is locked in for a set period (often 1–5 years). During this time:

• Your repayment amount stays the same each month
• Budgeting is simpler, because you know exactly what’s coming out of your account
• If interest rates rise, you’re protected for the fixed term

However, fixed-rate home loan types generally:

• Offer less flexibility for extra repayments (there may be caps or break fees)
• Can charge significant break costs if you want to refinance or pay out the loan early during the fixed term

To get the best of both worlds, many borrowers choose a split loan – one of the more flexible types of mortgage where:

• Part of the loan is fixed (for certainty)
• Part is variable (for flexibility and extra repayments)

Remember: once the fixed period ends, most loans revert to the lender’s standard variable rate, so it’s wise to review your options before that happens.

Other Types of Mortgage a Home Buyer Can Choose From

Beyond the classic fixed and variable structures, there are other home loan types that might suit specific situations.

Interest-Only Mortgage

Interest-only types of mortgage require you to pay just the interest component of the loan for a specified period (often 5–10 years). This means:

• Lower repayments during the interest-only phase
• No reduction in the principal balance during that time

Because the principal must still be repaid over the remaining term, lenders usually assess your capacity based on the shorter “residual” term. For example:

• A 30-year loan with 5 years interest-only will be assessed over the remaining 25 years, not 30.

This can actually reduce how much you’re allowed to borrow, especially if your income is tight. Interest-only types of mortgage are often used by:

• Property investors looking to maximise cash flow or tax deductions (where appropriate)
• Borrowers who expect their income to increase before the interest-only period ends

They can be useful, but it’s crucial to have a clear strategy for when principal repayments kick in.

Mortgage with Offset Accounts

Offset types of mortgage link your home loan to one or more everyday transaction accounts. The money sitting in the offset account reduces the balance the bank charges interest on.

Example:

• Home loan: $300,000
• Savings in offset account: $50,000
• Interest is charged as if the balance is $250,000

Over time, this can shave years off your loan and save significant interest, especially if you consistently keep funds in your offset. These home loan types tend to work best for people who:

• Keep a healthy savings or business buffer
• Have wages or rental income regularly flowing through their account

Package Loan Mortgage

Package types of mortgage bundle your home loan with other financial products from the same lender, such as:

• Credit cards
• Transaction accounts
• Sometimes insurance products

In return for paying an annual package fee, you may receive:

• Interest rate discounts
• Reduced or waived loan fees
• Fee waivers on associated accounts or cards

These mortgage types can be cost-effective if you’ll actually use the additional products – but you don’t want to pay an annual fee for features you don’t need.

Get Professional Advice on the Different Mortgage Types Available

There are countless different types of mortgage products in the Australian market, each with its own pros and cons. Choosing between fixed, variable, split, interest-only, offset and package home loan types can be confusing if you’re trying to do it alone.

How can you determine which of the mortgage types in Australia is right for you right now – and still flexible enough to support your future plans?
Start by talking to an experienced broker. At North Brisbane Home Loans, our team has over 90 years of combined experience in the finance industry and works with a wide range of mortgage variants every day. We can:

• Review your current situation and goals
• Explain the different mortgage types in plain English
• Recommend mortgage types that suit your budget, risk comfort and long-term plans

To find out which mortgage options would best fit your needs, book an appointment with North Brisbane Home Loans today.