How do home loan interest repayments work?

Interest on a home loan is typically calculated daily and then charged to the borrower at the end of the month. The interest rate charged will depend on the borrowers’ specific situation and the following can affect your rate:

  • The total amount you borrow
  • The number of years in your loan term
  • Your financial situation (borrowers with a high credit score may receive a lower interest rate)
  • Your deposit amount (typically 10-20% of the total amount borrowed as a minimum)

At Unity we offer fixed and floating interest rates.

What is a fixed home loan interest rate?

With a fixed rate home loan the interest rate you pay is fixed for a set term i.e. 6 months to 2 years. At the end of the term, you can choose to re-fix again for a new term at current interest rates, or move to a floating rate.


  • You know exactly how much each repayment will be over the term.
  • Lenders often offer fixed rate specials to remain competitive.
  • You can lock in lower rates if market interest rates are rising.


  • Fixed rates often have limits on how much extra you can add to your repayments without incurring charges.
  • If you take a long-term loan, there is a risk floating rates may drop below your fixed rate.
  • If you choose to sell your property and/or break a fixed loan you may be charged a ‘break fee’.

What is a floating home loan interest rate?

Floating rate loans can change as interest rates in the wider market change, normally linked to the Official Cash Rate (OCR). This means your repayments may go up or down.

TIP! You can change to a fixed rate at any time, at no cost.


  • You have more flexibility to make changes without penalty, such as increasing your repayments so you can pay off the loan early.
  • You can apply for a home loan top-up without incurring a break fee.
  • You can take advantage of decreases in interest rates


  • Floating rates have historically been higher than fixed rates.
  • When rates go up the repayments also go up, which could put a squeeze on your budget

More frequently asked questions about home loans

You may find the answer on one of the pages below: