What Are Basic Variable Rate Home Loans And Standard Variable Rate Home Loans?

Basic variable rate home loans : A basic variable rate home loan is a “no frills” loan with very basic features. It gives you a low interest rate because it has fewer features.

Having a home loan with a low interest rate means: you can purchase your first home sooner, as you will be required to pay less interest and fewer fees. In fact, basic home loans typically offer interest rates of half to one per cent below the standard variable rate. A low mortgage rate can shave years off your home loan repayment, or make your monthly repayment schedule easier to manage.

We want you to be confident with your home loan decision, so when we meet to discuss your needs, we break down the different home loan products into easy-to-understand components and language so you can compare your options with confidence.

Consider the following pros and cons before you decide on a basic home loan:
Pros of a basic variable rate home loan –
1. Choice of repayments Can be monthly, fortnightly or weekly
2. Low interest rate – The interest rate is always lower than the standard variable rate loans
3. Extra repayments – Most lenders allow extra repayments without incurring a penalty

Cons of a basic variable rate home loan
1. High break cost – Some lenders charge a high break cost if you leave them during a period of time usually within the first 4 years of you taking out a mortgage
2. Variable rate – The interest rate is variable and fluctuates with market conditions
3. Limited facility – Other facilities such as loan redraw may not be available.

Standard variable rate home loans: A standard variable home loan is the most common mortgage. For borrowers, this type of home loan offers the right mix of various features like split loans, internet and phone banking, redraw facility, etc.

A standard variable rate home loan is suitable for those who want to make extra repayments without penalty, draw out surplus funds or access a line of credit. For the benefits of having these features, a standard variable rate mortgage will have a higher interest rate than a basic home loan.

Consider the following pros and cons before you decide on a standard variable rate home loan:
Pros of a standard variable rate home loan
1. Choice of Repayments – Can be monthly, fortnightly or weekly
2. Redraw Facility – Most institutions (subject to terms and conditions) will allow you to withdraw any surplus funds you have above the minimum repayment
3. Offset accounts A high interest account to offset credit balances held with the same institution against the principal and interest repayment of the loan
4. Extra repayments You can make lump sum repayment or above the minimum repayment

Cons of a standard variable rate home loan
1. Higher interest rate then your normal basic home loan
2. Rates fluctuate according to market conditions and lenders can increase/decrease the interest rate at their discretion