Variable Home Loans

What is a Variable Rate Loan?

Variable Home Loans are common in Australia with many home owners preferring them over fixed rate loans. If you prefer to have the flexibility of borrowing money based on the current interest rate and rate set by your lender, the benefits of a variable home loan can be huge.

Benefits of a Variable Rate Home Loan

It is important to consider whether this type of loan is the best option for you. It’s recommended to compare several products from different providers or to speak to a mortgage expert/broker about your needs.

You’ll often find that variable home loans are feature rich, however it’s important that you don’t sign up to loans with features that you’re unlikely to use as these could end up costing you more. Additionally, reflect whether you’re likely or able to use all of the features of the loan throughout the borrowing period.

  • The interest rate could be lower than fixed rates if RBA rates drop The interest rate on a variable loan can fall when the RBA (Reserve Bank of Australia) drops rates. This depends on whether the lender passes on the rate cut to you. Beware: not all lenders do pass rate cuts, or only pass a percentage.
  • Additional loan features. Common additional benefits include options such as additional repayment facilities, redraw options and even offset features. Some loans even include a line of credit option whereby you can borrow credit against your home.
  • Enjoy a lower interest rate Because there is a risk for lenders to offer a fixed rate over a long period of time, fixed-rate loans generally have a higher interest rate.
Tip: Adjust interest rates to your worst case scenario using a home loan calculator to establish whether you would be able afford repayments in the event of a steep rate rise. If you are happy to accept that risk, then you could benefit from a variable rate home loan.