First Home Buyer's Guide to Fixed, Variable & Split Loans

Making Sense of Your First Home Loan Options

As a FIFO worker looking at buying your first home, you're probably discovering that choosing the right home loan structure is just as important as finding the right property. With your unique work situation, understanding the differences between fixed, variable, and split loan options can help you make a decision that suits your income patterns and financial goals.

Let's break down each option so you can work out which one fits your circumstances.

What is a Fixed Interest Rate Home Loan?

A fixed interest rate home loan locks in your interest rate for a set period, typically between one and five years. During this time, your repayments stay the same regardless of what happens in the broader market.

Benefits for FIFO Workers:

• Predictable repayments make budgeting during your roster cycles easier
• Protection against interest rate rises
• Peace of mind knowing exactly what your mortgage will cost
• Helpful when managing irregular income patterns

Things to Consider:

• Limited or no access to an offset account with many fixed rate products
• Restrictions on making extra repayments (often capped at $10,000 to $30,000 per year)
• Break fees can apply if you need to refinance or sell before the fixed period ends
• You won't benefit if interest rates drop during your fixed period

For FIFO workers who value certainty in their first home buyer budget, a fixed interest rate can provide stability while you're establishing your mortgage repayment routine.

Understanding Variable Interest Rate Loans

Variable interest rate loans fluctuate with the market. When the Reserve Bank adjusts the cash rate, or when lenders change their rates, your interest rate and repayments can go up or down.

Benefits for FIFO Workers:

• Full access to features like offset accounts and redraw facilities
• Unlimited extra repayments without penalties
• Flexibility to refinance without break fees
• Potential for interest rate discounts during low-rate periods
• Often comes with more loan features and flexibility

Things to Consider:

• Repayments can increase when rates rise
• Requires more active management of your first home buyer budget
• Less predictable for long-term financial planning

The flexibility of variable rates suits many FIFO workers who want to make extra repayments during high-earning periods and access those funds through redraw when they need them.

Split Loan Options: Getting the Best of Both Worlds

A split loan divides your home loan into two portions - one fixed and one variable. For example, you might fix 50% of your loan and keep 50% variable, though you can choose any split that works for you.

Why FIFO Workers Consider Split Loans:

• Balances stability with flexibility
• Allows you to make extra repayments on the variable portion while having certainty on the fixed portion
• Provides some protection against rate rises while still benefiting if rates fall
• Access to an offset account on the variable portion
• Can align different portions with different financial goals

Practical Example:

Imagine you're buying your first home with a $500,000 loan. You could fix $300,000 for three years at a fixed interest rate, giving you predictable repayments. The remaining $200,000 stays variable, allowing you to:

• Make unlimited extra repayments during your earning swings
• Use an offset account to reduce interest
• Have flexibility if you want to refinance part of your loan

Choosing the Right Option for Your First Home Loan Application

When you apply for a home loan as a FIFO worker, several factors should influence your decision:

Your Financial Situation:

• How stable is your FIFO role?
• Do you have a strong savings buffer?
• Are you using low deposit options like a 5% deposit or 10% deposit scheme?
• Will you need to pay Lenders Mortgage Insurance (LMI)?

Your Income Pattern:

• Can you consistently meet higher repayments if rates rise?
• Do you earn enough during high-income periods to make extra repayments?
• Are you claiming first home owner grants (FHOG) or first home buyer stamp duty concessions?

Your Goals:

• Do you plan to pay off your loan quickly?
• Are you buying in a regional area where you might qualify for the Regional First Home Buyer Guarantee?
• Did you use the First Home Loan Deposit Scheme or first home super saver scheme?

Getting Pre-Approval and Moving Forward

Before you commit to any loan structure, getting pre-approval gives you clarity on your borrowing capacity and strengthens your position when making an offer.

Your First Home Buyer Checklist Should Include:

1. Understanding your first home buyer eligibility for government schemes
2. Researching available first home buyer grants in your state
3. Calculating your deposit (including whether a gift deposit is an option)
4. Comparing different home loan options and interest rate structures
5. Considering whether LMI waivers are available for FIFO workers
6. Speaking with a mortgage broker who understands FIFO income

Working with FIFO-Specialist Brokers

Your work situation requires a broker who understands how lenders assess FIFO income. Not all lenders view FIFO workers favourably, but those who do often offer competitive products across fixed, variable, and split options.

A specialist broker can help you:

• Navigate lender policies around FIFO income
• Find products with the features you need
• Structure your loan to suit your roster patterns
• Access low deposit options if you're entering the market sooner
• Understand the true costs including interest rates and fees

Whether you choose fixed, variable, or split, the right structure depends on your personal circumstances, risk tolerance, and financial goals. There's no one-size-fits-all answer, but understanding each option puts you in control of your first home loan application.

Call one of our team or book an appointment at a time that works for you - even between rosters. We specialise in helping FIFO workers secure home loans that work with your unique income structure.