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Home Loans
A home loan lets you borrow money to buy property and repay it with interest over time. Here is exactly how the structure, repayments and features work in Australia.
By Jason Given · April 2026 · 5 min read
A home loan is a secured loan — you borrow a sum of money from a lender to purchase a property, and the property itself acts as security for the loan. If you stop making repayments, the lender has the right to sell the property to recover the debt. In exchange for this security, lenders offer significantly lower interest rates than unsecured loans like personal loans or credit cards.
You repay the loan over an agreed term — typically 25 to 30 years — through regular repayments that cover both the interest accruing on the outstanding balance and a portion of the principal. Over time, your balance reduces and your ownership stake in the property — your equity — grows.
The LVR is the ratio of your loan amount to the property's value, expressed as a percentage. On a $600,000 property with a $120,000 deposit, the loan is $480,000 — an LVR of 80%. Most lenders require an LVR of 80% or below to avoid Lenders Mortgage Insurance (LMI).
LMI is insurance that protects the lender — not you — if you default on a loan above 80% LVR. You pay the premium, which can be added to the loan balance. Government schemes like the First Home Guarantee allow eligible buyers to borrow up to 95% without paying LMI.
Your LVR affects your interest rate as well as your LMI liability. Lenders typically offer lower rates to borrowers with LVRs below 70% or 80% because the risk is lower. Reaching 80% LVR through repayments or property growth can trigger a rate reduction.
Most home loans are structured over 25 to 30 years. With extra repayments or a shorter initial term, many borrowers pay off their loan significantly earlier. Lendology models different repayment scenarios to help you understand the trade-offs.
When the final repayment is made, the lender discharges the mortgage — removing their security interest over the property. You own the property outright. The discharge process involves a small fee and takes a few weeks to complete.
Yes. Variable loans allow unlimited extra repayments without penalty. Fixed loans typically allow up to $10,000 per year in extra repayments. Paying off your loan early saves significant interest — every extra dollar reduces the balance on which interest accrues.
Equity is the difference between your property's current market value and the outstanding loan balance. If your home is worth $800,000 and you owe $400,000, you have $400,000 in equity. You can access equity through a top-up loan to fund renovations, investment deposits, or other purposes.