Variable Rate Home Loans

Variable rate home loans

A variable rate home loan generally follows the market when rates increase and decrease. You will save more interest if you credit all your wages into your variable rate home loan and use your redraw or offset account to pay your bills online. All online transactions are unlimited and attract no fees.

About Variable Rate Home Loans

Variable home loans are the most popular home loans in Australia. Aussies love variable rate home loans for they are in highest demand and the most popular. Bank portfolios are largely variable rate loans. Variable rate home loans are the most flexible in most instances. Variable rate home loans are much more flexible permitting unrestricted access to you redraw or offset account & unlimited ability to make principal reductions with no penalties. When it comes to saving money, our variable interest home loan can potentially leave more money in your pocket and it provides the opportunity to pay off your mortgage faster.

A considered mortgage broker will recommend a variable rate home loan when a construction loan is requested, when borrows wish to make large additional repayments needing the freedom to make unrestricted withdrawals (also known as redraws), renovation loans, owner builders when a borrower wishes to pay their loan off faster and own their home sooner. Variable interest rates are usually lower than fixed home loan rates expect in unusual circumstances when the economy is contracting and the market is forecasting lower rates in the near future Typical variable home loan rates are influenced significantly by Reserve Bank of Australia (RBA) governed cash rates. However, market pressures and global wholesale cost of funds also play a material role in setting interest rates. So, if repayment certainty is a requirement a good mortgage broker will recommend a fixed rate loan or a split loan (Combination of fixed and variable).

Progressive Fixed Interest

Variable home loans can be of two types: basic and standard. A standard variable home loan is more full-featured and gives you additional features:

Redraw & offset facilities

Ability to make extra repayments

The option to split your loan.

Redraw & offset facilities

Ability to make extra repayments

The option to split your loan.

Mortgage Street offers both types of loans and you can compare our range of variable rate mortgages

Advantages

The variable home loan interest rate is generally lower than that of a fixed rate mortgage.

Your actual home loan repayments will normally be lower than for a fixed rate mortgage.

You can usually make extra repayments without penalty with a variable interest rate, which gives you more flexibility.

You have access to a redraw facility on variable home loans

Disadvantages

Attractive introductory interest rates are usually only available on new variable interest rate home loans.

Your regular repayment amount is not fixed, which brings uncertainty when it comes to budgeting for mortgage payments as a result of possible interest rate increases.

There are two types of variable rate mortgages – basic and standard. The main difference is a standard variable rate home loan is more flexible and can offer you a lot of additional features and services. Among them is the ability have redraw and offset facilities, which can be handy as you go through life and need to access extra money. You can also make extra payments with standard variable loans, without being penalised or being charged extra fees. Finally, a standard variable loan allows you to split your loan into variable and fixed, if circumstances change. This can help with budgeting and can give you the peace of mind of knowing exactly how much your repayments will be for part of your loan.

There are many reasons why the interest rate of a variable loan can change, and it all comes down to the lender. The most public reason is an official rate change from the Reserve Bank. The Reserve Bank meets monthly, and discusses whether or not to change the official cash rate. The cash rate is how much the Reserve Bank charges lenders for overnight loans, and if they increase that rate, lenders often respond. When the Reserve Bank decreases the rate, there is pressure on the major lenders to do the same. However, that isn’t always the case. Recent times have seen the major banks and lenders move independently of the Reserve Bank, which takes into consideration international events, and the state of the Australian economy & Bank credit rating when making its decisions. The Reserve Bank is keen to grow Australia’s economy, without overheating it. Bank and lenders can also react to their own lending costs or regulation changes, and even pressure from their shareholders to increase their own financial positions. If your bank or lender does increase your variable rate, and they will give you plenty of warning when they do, that can be a good time to shop around and see what other variable mortgages are suitable. You can ask your accredited mortgage broker to compare variable rate mortgages to see how they stack up with what you are currently being charged.

You will find variable rate mortgages across a range of our different loan types. If you are buying your first home, second home, or even third home, a variable loan can be the right option for you and your family. If you have decided to buy an investment property, combining the equity in your current home with an investment loan can be a real winner. And if you are building your home, one of our construction variable rate loans can take a lot of stress out of building. There are variable mortgage options dotted across most of our loan types, so ask your accredited mortgage broker to take a close look and compare what we can offer, and check out our very competitive rates.

Comparing variable rate mortgages can be tough, given the amount there are on offer. The first thing to remember is that a lot of the attractive introductory interest rate offers can be for new loans only. That’s important to note, especially if you are looking to refinance your existing mortgage. Professional mortgage brokers can compare up to five home loans side by side online at any one time, allowing you to see immediately how our loans stack up against what the banks and other major lenders are offering. We think you will be surprised by what you find. The first thing to take into account is, obviously, the interest rate. Mortgage broker calculators will work out what your repayments will be, and don’t forget to add an extra bit of interest rate room to help you see what you might be paying per week or month if rates rise.

Whether you choose a fixed interest rate mortgage or a variable rate home loan, it is up to you. Both have advantages, and both can be suitable for your property needs. A fixed rate home loan means your repayments will stay the same over the agreed period, usually between 1 and 5 years, which can be important if you are looking for budget stability and security. A variable rate home loan, however, can see your repayment amount increase or decrease over the life of the loan, whether that’s 15 years, 25 years, 30 years or even 40 years. Variable rate home loans can be more flexible than fixed rate loans and can include a larger range of features. No matter what type of real estate you are buying, your mortgage broker can provide a suitable home loan for you, whether you are after a principal and interest loan, or an interest only loan. If you’re looking for an owner occupied home loan or an investment mortgage, choosing between a variable rate or fixed rate loan can come down to your property objectives and financial situation. Speak with your mortgage broker & experts if you have any questions about which kind of loan may be suitable for you.

When you are choosing a variable rate home loan, there are a lot of things to think about. Top of the list is usually your budget. Finding the best interest rate you can, and making sure you can afford the repayments, is at the forefront of most people’s minds. Between credit card payments, living expenses and those extra little treats you like to give yourself, whether or not you can afford interest rates increases is the last thing anyone wants to worry about. That’s where professional mortgage brokers can help. Their mortgage repayment calculator can let you know what your repayments are likely to be with any home loan, and can help you simulate increases or decreases in interest rates. Keep the loan amount, loan period, loan type and introductory rate information the same when you use the calculator, but adjust the interest rate amount. The monthly, weekly or fortnightly repayment amounts will adjust accordingly, giving you a clearer picture of how it will impact on your budget. Mortgage brokers want you to have as much information available as possible before you choose a home loan.

Low doc is short for low documentation, and low doc loans are a way for those who may not have access to the full range of documents banks and lenders require to approve a home loan, to take out a mortgage. Low doc home loans can be suitable for contractors, small business owners and freelancers, who can either self certify their income when they apply for a home loan. Mortgage brokers have a range of both variable rate and fixed rate low doc home loans to choose from. It’s important to remember that low doc interest rates can be a little higher than regular variable rate or fixed rate mortgages. Whatever your loan amount, contact our expert mortgage broker if you have any questions about documentation before you apply for a home loan.

An offset account, or an offset facility as it is often known, can be one of the many features of a lot of variable rate home loans, and it can save you money. To put it simply, you can use a non interest bearing sub account to offset the interest on your mortgage. Interest is calculated on the difference between the two accounts, rather than just the amount in your home loan account. For example, if you have a $950,000 home loan, and $60,000 in an offset account, the interest will be calculated on $890,000, not $950,000. Obviously, as those amounts change, so will the interest calculation.

The first things to consider when comparing variable rate home loans is your property objectives and financial situation. That will help guide you regarding interest rates and repayment amounts. Also look at comparison rates, which are an indication of the true cost of the mortgage over the life of the loan, with fees taken into account. Look at the features and flexibility of each variable rate home loan, whether or not you can make extra repayments if you want to without being penalised, and whether you have access to a redraw facility. Don’t forget to consult with your professional mortgage broker for guidance & assistance.

Hint: It is good and sound practice to request a rate review from your trusted mortgage broker