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Variable rate home loans

What Is A Variable-Rate Home Loan?

A variable-rate home loan is a type of mortgage on which the interest rate fluctuates based on changes in the property market. Unlike a fixed-rate home loan, whose interest rate remains constant for a set period, a variable rate can go up or down over time.

Variable rates change with the Reserve Bank of Australia’s (RBA) cash rate and the Bank Standard Variable Rate (BSVR), causing your repayments to fluctuate.

Many lenders offer variable-rate home loans without an application fee, making them an more attractive option for borrowers.

By choosing the right lender, you can secure a competitive interest rate, helping you save money and manage your finances more effectively.

Should I Choose A Variable-Rate Home Loan?

Opting for a variable-rate home loan can be advantageous, but it’s essential to weigh the pros and cons carefully in light of your financial circumstances.

Pros And Cons Of Variable-Rate Home Loans

Pros of getting a variable-rate home loan

• Availability: Variable-rate loans are widely offered by most lenders, making them a common choice for many borrowers.
• Features: These loans typically come with a range of benefits, including 100% offset accounts, unlimited extra repayments, and redraw facilities, providing flexibility in how you manage your mortgage.
• Refinancing Ease: Switching lenders is generally easier and comes with lower fees, giving you the option to refinance if better rates become available.
• Lower Rates: You could benefit from interest-rate reductions, which can lower your repayments during periods of rate cuts.
• Flexible Repayments: The ability to make extra repayments allows you to pay off your mortgage faster, potentially saving on interest over the life of the loan.

Cons of getting a variable-rate home loan

• Unpredictable Rates: Because interest rates can change, it can be challenging to budget, as your repayments may increase unexpectedly.
• Impact of Economic Changes: Your loan repayments could be influenced by broader economic factors, such as inflation or an economic downturn, which are beyond your control.
• Potential Financial Stress: If interest rates rise and your income does not keep pace, you may face financial stress trying to meet higher repayment obligations.

Fees and Charge

On a variable rate loan, you’re required to cover the standard costs associated with a home loan. These costs include:

• Application fees: Most lenders don’t charge an application fee for a variable rate home loan.
• Valuation fees: When you valuate your property, you’ll usually be charged a fee.
• Conveyancing fee: You may be required to hire a conveyancer or solicitor to help you make financially sound decisions.
• Redraw fees: On a variable rate home loan, you can withdraw the additional funds that you’ve made from your loan account. Lenders may charge you a fee for this.
• Discharge fees: While the government has banned discharge fees for variable rate mortgages, lenders will still charge legal administrative costs. This can cost you from $150 to $400.
• Lenders Mortgage Insurance (LMI): As a general rule, you’ll be charged a fee if you’re looking to borrow over 80% LVR (Loan to Value Ratio). LMI is a one-off fee that is charged as protection for the lender in case the borrower isn’t able to repay the loan.

You can learn more about the costs to buy a home by using our Property Purchase Costs Calculator.

Why Choose Mortgage Brokers From Home Loan Experts?

• We help you to find the most competitive variable home loan rate.
• We guide you from finding the right home loan to finalising the settlement, and our commitment to customer care extends beyond the settlement, offering ongoing support throughout the life of your loan.
• Our services come at no cost to you, with no broker fees.
• Our expertise in navigating unique situations means we have a proven track record of securing approvals, even for customers who were previously declined.
• Our strong relationships with a panel of lenders allow us to negotiate competitive interest rates based on the strength of your application.
• The Best-Interests Duty (BID) requires us to act in your best interests, considering all aspects of your situation, not just the interest rate, and keeping you updated throughout the home loan process.
• We are proud members of the Finance Brokers Association of Australia (FBAA) and the Australian Financial Complaints Authority (AFCA), ensuring top industry standards and quality service.
• We have earned the ISO 27001 certification for data security, guaranteeing that your personal and business data is protected with top security measures.