What is a variable rate home loan?

A variable rate home loan (sometimes referred to as a “floating” or “adjustable” rate home loan) is a very popular product in the loan market and a very competitive product offered by most lenders/credit providers.

Who is suitable for a home loan with a variable interest rate?

This type of home loan is ideal for:

>> First time home buyers who just want a home finance company product that is simple and not confusing to manage

>> People who just want to settle down and are unwilling to move, be it at work, home, personal life or unwilling to switch to another lender

What should I consider when choosing a loan?

When choosing, you should always research and consider the following terms offered by many lenders/credit providers:

>> Be careful with any ‘honeymoon’ interest rate offers and always remember to check that the discount rate applied to the variable rate is a set amount lower than the standard variable

>> Remember that low rate home loans are not always the best option

>> Try to choose a loan term that suits your finances

>> Decide what is most important to you (eg does it meet your financial goals?)

What are the features of a home loan with a variable interest rate?

You need to know all the features of the loan package below in order to maximize the benefits:

>> Take advantage of falling “interest rates” when the Reserve Bank decides to cut its official rates

>> Make unlimited “extra installments” every month to pay off your home loan faster

>> Use the ‘overdraft’ option to withdraw any extra payments you’ve made over and above your regular repayments if you need cash

>> Use a 100% offset account

What are the advantages and disadvantages?

Choosing a loan package has many advantages, e.g.

>> Flexibility: It has some flexible features such as the ability to make additional payments, low introductory interest rates or overdraft facility.