Variable Rate Home Loans

What Are the Benefits of a Variable Rate Home Loan?

One of the main benefits of variable rate loans is that they are generally cheaper over the life of the loan. Several studies and analysis shows that variable rate loans are more cost effective in the long term. It feels like a little win every time interest rates are cut for variable rate mortgage holders! Although products vary, variable rate loans generally have more lenient terms and conditions attached, and most ‘exotic’ home loan types are issued on a variable rate basis. The impact of interest rate variation will be dependent on your loan period.

Remember to investigate all of a lender’s home loan options, though – package deals may mean the standard variable rate is not the best cheapest you have.

• Cheaper than fixed rate loans: Variable rate loans have been shown to be the cheaper option in some studies. However, it is important to remember that there are a multitude of individual factors and decisions that impact the overall cost of a loan, and the decision to fix your interest rate might not be the biggest of these.
• More features: Standard variable rate loan generally give you greater flexibility with your home equity, additional repayments and interest rate splitting.
• Building loans: If you’ve chosen to build a home rather than buy an existing one, you will generally be offered a building loan with a variable interest rate attached.
• Risk reduction rewards good home loan practices: If your preference is to repay your home loan as early as possible, if you saved a significant deposit for your loan and if you have chosen a shorter term, the risk inherent in a variable rate loan is effectively reduced in parallel with the term of the loan. In effect, variable rate loans reward smart borrowers.
• Ease of portability: If you’re the type of consumer who likes to shop around for the best deal, standard variable rate home loans are the most portable type of mortgage. Almost every lender offers some form of standard variable rate, both bank and non-bank.