9 February 2026 - 4 min read

What you’ll learn

• Fixed, variable, split and construction home loans each offer different levels of certainty, flexibility and features, and are suited to different financial needs and life stages.
• Your interest rate type and loan features — such as offset accounts, redraw facilities and fixed-rate terms — can affect both your regular repayments and the total interest you pay over the life of the loan.
• Choosing the right home loan depends on your financial situation, risk tolerance and future plans, making it important to understand how each option works before you apply.

Quick information:

• Variable rate home loan: flexible, responsive to interest rate changes
• Variable rate loan with offset account: adds an offset account and can help keep cash accessible
• Fixed rate home loan: can provide certainty for a set period
• Split home loan: combines fixed and variable features
• Construction home loan: designed for building or renovating
• Bridging loan: a short-term loan to help you buy before you sell
• Estimate your home loan repayments with our home loan calculators

Variable interest rate home loan

A variable rate loan has an interest rate that can change over time. Most variable home loans move when interest rates rise or fall.

How does it work?

At the time of writing this, variable rate home loan is the most common home loan in Australia. The interest rate may move with the official cash rate set by the Reserve Bank of Australia, so your home loan repayments may go up or down based on interest rate changes. If rates fall, your repayments likely will go down, but you can also choose to keep your repayments the same. This means you’ll be paying more than required each month, which can help you to pay off your loan faster.

Most lenders allow extra repayments, access to a redraw facility, and flexible payment options. Interest is calculated on the remaining loan balance.

Benefits of a variable interest rate home loan

Variable home loans are designed to give you flexibility. Not only can your repayments go down when interest rates drop, but there are often other potential advantages. With most variable home loans, you can make unlimited extra repayments (helping reduce the interest you pay and the time it takes to pay off your loan) and redraw your home loan, which lets you access funds you might have already repaid, up to your current limit.

Think about…

The most important consideration for a variable rate home loan is that monthly repayments can change. When interest rates rise, your monthly repayments go up, which can make it harder to budget during periods of higher interest rates. Your initial repayments may be lower, but costs can rise over the loan term.

Explore the Westpac Flexi First Option loan

Variable rate home loan with offset account

This option adds an offset account (also called an offset facility) to a variable rate home loan.

How does it work?

An offset is usually a transaction account linked to your loan. Money in the account offsets the loan amount used to calculate interest. You can put savings and other funds in this account and, while your savings don’t technically earn interest, it will reduce the home loan amount you need to pay interest on, as long as the money remains in the account.

Benefits of a variable interest rate home loan with offset account

A variable rate loan with offset is designed to give you flexibility and efficiency. You may be able to shorten the loan term and lower the total interest. The more money you keep in your offset, the less your interest charges will be.

Think about…

This type of loan may have a slightly higher interest rate than a home loan without an offset account. And, unlike some savings accounts, funds you keep in an offset won’t earn interest over time.

Learn more about Westpac Rocket Repay variable rate loan with offset

Fixed rate home loan

A fixed rate loan is another popular type of home loan. Instead of your interest rates and repayments changing with the market, you lock in a fixed interest rate for an agreed period, known as the fixed rate term.

How does it work?

Your loan repayments stay the same for the set period, which is generally one to five years, regardless of market movements. You usually start paying principal and interest repayments, though some fixed loans allow interest-only repayments.

After your loan term, you can fix it again at the interest rates available at the time or move on to the variable interest rate.

Benefits of a fixed rate home loan

Fixed rate home loans are designed to give you certainty. Your home loan repayments will stay the same during your fixed loan term, and that can help make budgeting easier, as well as give protection if interest rates rise.

Think about…

Fixed loans have limited flexibility, so when the market interest rates go down, your repayments won’t drop with them. You may also be limited in how much extra you can repay on your home loan, and if you’d like to end the loan before the fixed term is up, you may have to pay break costs.

Learn more about the Westpac Fixed Option fixed loan

Split home loan

A split loan divides the loan amount into two parts: one fixed, one variable.

How it works

When you get a split home loan, you fix part of the loan and the rest becomes the variable portion. The fixed portion gives you a level of certainty, while the variable part lets you benefit from interest rate drops, and you can make extra repayments, redraw or top-up for that portion of your loan.

Benefits of a split loan

This type of loan gives you a balance of certainty and flexibility. The fixed portion of your loan will give your repayments some stability, even when interest rates rise and fall. If interest rates do fall, your repayments on the variable portion of the loan will also fall. You may be able to add extra repayments and an offset account to the variable portion of your loan.

Think about…

If interest rates rise, your repayments on the variable portion of your loan will also go up. Your ability to make extra repayments may be limited on the fixed portion and there may be break costs if you exit the fixed portion early.

Learn more about the Westpac split home loan

Construction loan

A construction loan is designed for building or major renovations.

How does it work?

You normally have the option for a variable or fixed interest rate with a construction loan, and it allows you to draw down the loan in stages alongside the work. This allows you to pay trades and suppliers for what they have done, while not taking on all the debt until the work is complete.

During construction, it may be possible to make interest-only repayments on the amount drawn. Then once complete, you start paying a principal and interest loan.

Benefits of a construction loan

A construction loan is designed for a specific loan purpose, and matches cash flow to construction stages, which may be helpful. It may also be possible to only pay interest on funds drawn down, rather than the whole amount upfront, which means lower repayments overall.

Think about…

A construction loan can have strict lending criteria, requires approved building contracts, and delays in construction may increase costs.

Explore the Westpac construction loan

Bridging loan

A bridging loan helps buyers purchase a new home before selling their existing one.

How it works

A bridging loan is a short-term loan that’s closed when your existing property is sold. The size of the bridging loan is calculated on the available usable equity in your home loan.

Benefits of a bridging loan

A bridging loan makes it possible to buy a new home without selling your current home first and may help avoid rushing to purchase a property in a tight market.

Think about…

A bridging home loan may have short timeframes and can also depend on confidence in the sale price of your home or rental market.

Owner-occupier vs investment home loans

An owner-occupier home loan is for a home you live in, while investment home loans are for rental properties. Key differences include:

• Pricing and interest repayments
• Potential tax implications for investors
• Different lending criteria
• Possible lenders mortgage insurance costs

Some investors may choose an interest-only loan, or a loan with an interest-only period, while owner occupiers typically choose a principal and interest loan.

To sum up

Your ideal loan depends on your financial situation, income stability, and long-term plans. With so many loan types available — and factors like repayment options, interest charges, and features to compare — guidance matters.

Westpac offers tools to support every stage of your home loan journey, including access to a dedicated lender to help assess new loan options. There’s also a home loan selector, to help you choose the right home loan. With the right support, you can choose a loan that fits today and adapts as your life changes.

Find more information on the Westpac home loan hub