PRINCIPAL & INTEREST VS. INTEREST ONLY HOME LOANS
Choosing a principal and interest loan means the regular payments you pay cover the loan's interest and chip away at the actual loan (the principal). Usually, these loans can pay off over a 20 to 30-year period.
Interest-only loans are an agreement with the lender only to pay the interest on the loan. These agreements are a specific amount of time (usually between 1-5 years, which means that your repayment process is lower, which is helpful through a period of uncertainty in the position.
Everyone's circumstance differs, so you should have your accountant advise you of all the advantages and disadvantages of each type and recommend one that best suits you.
FIXED VS. VARIABLE HOME LOANS
A fixed home loan means you lock a particular interest rate for a specific period of time (usually 1,3 or 5 years). Your interest rate as repayment amounts will not change, and when interest rates increase, you will reap the benefits of having a low-interest rate locked in.
A variable home loan depends on market interest rates, which means that an actual repayment is subject to change. However, when applying for a loan, the variable rates are usually lower than fixed rates.
Again, there're always trades off. You should consult your accountant to know what is best for you.
OFFSET VS. REDRAW
An offset account is a separate savings account, which means any money in this account 'offsets' your home loan amount.
The offset account is fully accessible because it is a savings deposit account, and you can implement this over time. Also, due to this, there are many strategies you can implement that, over time, will result in considerable interest savings.
A redraw facility is not a separate account. It is instead considered a 'feature' of a home loan account. It allows you to 'redraw' extra payments you've made towards your home loan, but it is usually not as flexible as an offset account.
Source: moneysmart.gov.au
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