Standard variable rate loans
Standard variable rate loans give you flexibility and the option of extra features that can save you thousands in the long run.
Unlike a fixed rate loan, you will be able to pay off your mortgage earlier than planned without attracting extra fees.
You can also add an offset account, which is a transaction account linked to your loan. Any credit in here is offset against your loan balance, reducing the payable interest on your mortgage and potentially saving tens of thousands of dollars over the life of your loan.
A standard variable rate loan also gives you the option to redraw funds or split your loan so that a portion of it is a fixed rate.
Basic variable rate loans
A basic variable loan usually has a considerably lower interest rate, but doesn’t allow an offset account.
It’s best suited to people who only want to make minimum repayments at fortnightly or monthly intervals over the term of their loan.
Variable loan drawbacks
The downside of variable rate loans is that they are subject to market sensitivity. If the official interest rate rises, so will the interest rate on your loan and you will find yourself paying more than expected each month. If you need predictability in your repayments, you may be better suited to a fixed rate home loan.
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