We live in a day when no one can go around without a home loan. Sadly, our monthly income doesn’t allow us to pay for a house right off the bat. Therefore, if we want to own a house, we need to be ready to go into debt – and this means taking out a home loan.

Still, if you do some research, you’ll soon come to a realisation: there are too many of them! How do we choose the right home loan if there are so many options for us out there?

Comparing Home Loans

Before settling on a home loan, you may want to compare your options first – and the best way to do that is comparing the key fact sheets you got from the lenders. Gather as many of those sheets as you can so that you can compare everything from the fees to the interest rates and the features.

These key fact sheets will tell you everything you need to know about the loan: how long you’ll be required to pay, total fees, monthly fees, and everything else related to the loan. Still, in order to get this sheet, you need to ask for it.

Types of Home Loans

The type of home loan that you choose is also of great importance when settling. Here are the most common ones you will come across during your research:

  • Principal and Interest Loans

These are the most common types of home loans. Basically, when you take a principal and interest loan, you make payments for the principal (the money you actually borrowed), as well as the interest.

Over the time of the loan, this one will be repaid in full. Depending on the type of the loan, it may take 25 or 30 years to pay it off completely.

  • Interest-Only Loans

As the name already tells us, you are only paying the interest. The amount you borrowed will still be there, so unless you make any extra payments, the loan won’t go away. This type of loan may not only cost you more interest during the length of the loan, but it will also take more time to pay off – since the “principal” is basically going nowhere.

  • Variable Home Loans

With variable home loans, the interest rate can change depending on the cash rate- but this is also something you discuss with your lender. This rate can go up and down, and they never usually stay the same from one month to another.

  • Fixed Home Loan

It is called a “fixed” home loan, but it’s more of a half-half. The interest rate of your loan will stay the same for two to five years, but once that time passes, you’ll go back to paying for a variable home loan.


To cut from the payments, it’s never a bad idea to pay a little extra. Before settling on a certain type of home loan, you might want to dive deeper into the pros and cons and make sure that it’s the right choice for you.