A home loan, also known as a mortgage, is a long-term loan you get from a bank or financial institution to buy property. You borrow a lump sum of money and pay it back over an agreed period, typically 15 to 30 years, with interest. The property you buy serves as security for the loan, meaning if you can’t make your repayments, the lender has the right to sell the property to recover their money.
For most Australians, getting a home loan is the biggest financial commitment they’ll ever make. That’s why it’s so important to understand how they work and to find one with a competitive interest rate and features that suit your needs.
Thinking about getting a mortgage? It can seem complicated, but understanding the basics is the first step towards owning your own home. Let’s break down how it typically works in Australia.
Most lenders in Australia ask for a deposit that’s 20% of the property’s value. This means they’ll lend you the remaining 80%. This is a Loan to Value ratio of 20%, or LVR.
However, some lenders, may allow a smaller deposit, like 10%. If you go down this route, you’ll usually need to pay for Lender’s Mortgage Insurance (LMI). Your interest rate might also be different.
Some first-time home buyers may be eligible for the Federal Government’s 5% Home Deposit Scheme or other incentives depending on their State or Territory.
A typical mortgage in Australia is set up for a 30-year term. When you take out a loan, you can usually choose between:
Fixed Rate Home Loans
A fixed rate loan involves interest costs being fixed within a set time, usually 1 to 5 years. You are assured of your repayment amount, so it makes your budgeting easier. The downside is that if interest rates fall you won’t be able to keep benefiting, and there are often restrictions for making additional repayments.
Variable Rate Home Loans
In a variable rate loan, your interest rate can fluctuate with market changes. Meaning your repayments can vary so there’s less budget certainty. But if rates fall, you’ll be paying less. Variable rate loans are therefore also a bit more flexible, allowing for unlimited extra repayments, and adding options to the mix like an offset account.
Split Rate Home Loans
Can’t choose between variable and fixed? A split loan is the best of both worlds. You can fix a portion of your loan and leave the balance at a variable rate. That provides you some certainty about your repayments but also lets you take advantage if rates drop.
Australian mortgages often come with handy features designed to help you manage your loan and save money. Some popular ones include:
An offset account is a great way to save on interest and pay off your loan sooner. The money you keep in this account reduces the loan balance that a bank or lender will calculate interest on.
For example, if you have a $350,000 home loan and $20,000 in your offset sub-account, you’ll only be charged interest on $330,000.
This interest saving goes directly towards paying off your principal (the amount you borrowed). By paying down your principal faster, you pay less interest over time and can own your home sooner.
As the name suggests, interest-only payments allow you to cover just the interest on your loan for an agreed period, without touching the principal. This lowers your repayments temporarily.
Keep in mind, once the interest-only period ends, your repayments will increase to cover both principal and interest, usually at a variable rate.
Your financial situation and property goals will determine which type of home loan is right for you. Here’s a breakdown of the most common options available to Australian borrowers.
Buying your first home is a huge milestone! Loans for first home buyers are designed to help you get onto the property ladder. Many lenders offer special deals, and you might be eligible for government grants and schemes to help with your deposit. We provide the tools to see what you could borrow and what your repayments might look like
If you're buying a property to live in, you're an owner-occupier. These loans are the most common type of mortgage. Because lenders see owner-occupiers as lower risk than investors, they often offer more competitive interest rates. Whether you're upgrading, downsizing, or simply moving, we can help you find a great rate.
An investment loan is for buying a property you intend to rent out. These loans can have slightly different features and criteria compared to owner-occupier loans. For example, you might be interested in an interest-only loan to maximise your cash flow. Our tools let you compare a wide range of investment loans to support your wealth-building journey.
Refinancing means switching your existing home loan to a new one, either with your current lender or a different one. People refinance for many reasons: to get a lower interest rate, access equity for renovations, consolidate debt, or switch to a loan with better features. It could save you thousands over the life of your loan.
Look at rates, features, and fees to find the right fit for your goals.
Use a loan calculator or get pre-assessed by a broker to see how much you can borrow.
Provide all required documents and details about your income, assets, and expenses.
The lender assesses the property’s value and finalises your loan approval.
Review the loan agreement, sign the documents, and prepare for settlement and ownership transfer.
The Australian government offers several schemes to help first home buyers enter the property market sooner. These are available at both federal and state levels.
Federal Schemes
State and Territory Schemes
Each state and territory has its own set of grants and concessions, such as the First Home Owner Grant (FHOG) and stamp duty exemptions or discounts. The eligibility criteria and amounts vary, so it’s important to check what’s available in your state.
| Category | Number of New Loans (Jun 2025) | Value of New Loans ($ billion, Jun 2025) |
|---|---|---|
|
Total Dwellings |
129,994 |
87.664 |
|
Owner-Occupier Loans |
82,774 |
54.743 |
|
First Home Buyers |
29,506 |
15.89 |
|
Investor Loans |
47,220 |
32.921 |
Source: Australian Bureau of Statistics, lending indicators
First Home Buyers: Nearly 30,000 new loans were committed to first home buyers in June 2025, representing a significant portion of owner-occupier loans.
Investor Activity: Investor loans remain strong, with over 47,000 new commitments, indicating ongoing interest in investment properties.
Total Market: The total number of new loan commitments for dwellings is approaching 130,000, reflecting a robust housing market.
According to the ABS and the latest Domain House Price Report (June, 2025) median house prices outstrip average (mean) loan sizes by a factor of 2:1 in many states, particularly NSW and Victoria. This may indicate many first home buyers may need to borrow less than the full value of the property, possibly due to deposits or other financial arrangements such as government guarantees on new home buyer deposits
| State | Average Loan Size ($ '000) | Median House Price ($ '000) |
|---|---|---|
|
Australia |
678 |
1,200 |
|
NSW |
816 |
1,722 |
|
Vic |
660 |
1,200 |
|
Qld |
662 |
950 |
|
SA |
620 |
750 |
|
WA |
635 |
700 |
|
Tas |
487 |
650 |
|
NT |
484 |
550 |
|
ACT |
635 |
1,100 |
Yes, many lenders allow switching, but fees or conditions may apply. Compare your options to find the best fit for your financial goals using our comparison tools.
If your deposit is under 20%, you’ll likely need LMI. It protects the lender, not you, but can help you buy sooner. Use our calculator to include LMI in your budget.
Common fees include:
Check the comparison rate for a clearer picture of overall costs.
