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A little known fact about Variable Rates

Did you know that there are two types of variable rates?

They’re known as standard rates and basic rates and choosing the right one could save you thousands of dollars a year on your mortgage.

Standard variable rates have lots of features, meaning you can pay off your home loan faster. But did you know that a bank's standard variable rate is often one of it's highest interest rates? When you add in a package to your home loan (which gives you amongst other things a discounted interest rate and offset account) this variable rate will significantly come down.

Basic variable rates have very few features which may restrict how quickly you can pay off your loan but they tend to have lower interest rates. For some first home buyers starting out who don't want bells and whistles, this type of loan can be perfect. Cheap, low rate and no fuss.

There are pros and cons to both of these options and the right one for you is completely dependant on your personal situation. Some great questions to think about:

  • Do you have significant surplus funds each month where you would benefit in reducing interest via an offset account?

  • Do you want to be able to access any extra funds you pay into your loan fee free?

  • Do you want a no fuss, low variable rate loan which ticks along each month with your only priority is making your repayment when due?

  • Do you want access to a fee free credit card as part of your home loan?

To find out which one is right for you, touch base and we can discuss. And remember never to just accept the base standard variable rate on offer with a bank as chance are, it will cost you.

Bernadette Leahy

Authorised Mortgage Consultant


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