Variable Rate Home Loan

Generally the most flexible of all loan types, the Variable rate allows additional repayments, redraw and offset facilities. Variable rate products vary in flexibility with the Basic Variable rate home loan generally offering less flexibility than the Standard Variable Rate home loan. The rate is variable and traditionally moves in line with changes to interest rates as determined by the Reserve Bank.

Advantages:

– as interest rates decrease, the interest component of your repayment amount may decrease
– flexibility to make additional loan repayments
– redraw facility on surplus funds from additional loan repayments

Disadvantages:

– as interest rates increase, repayment amounts increase

Variable Rate Fixed Home Loan

A fixed rate loan has a fixed interest rate for a term of the loan. Fixed terms generally range from 12 months through to 10 years. Whilst the fixed rate home loan is more restrictive than a variable rate loan, it provides you with the comfort that your repayments will not change during the fixed term of the loan

Advantages:

– repayments do not increase if interest rates increase
– allows you to budget repayments as they are fixed for the agreed fixed term
– offers peace of mind that repayments remain the same for the agreed fixed term

Disadvantages:

– additional repayments may be limited if not unavailable
– fees may apply if loan is paid out during the fixed rate period as interest rates decrease, the rate remains fixed and does not decrease

Combination/Split Loan

A Combination or Split Home Loan enables you to take advantage of the best features of both a Variable Rate home loan and a Fixed Rate home loan by splitting your requirements.