A basic variable rate loan doesn’t include the bells and whistles of a home loan package, so it tends to have a lower interest rate and less fees. This home loan type is best suited to first home buyers aiming to keep costs down and manage a simple, convenient loan without the frills.
If you value more flexibility and want to redraw from your loan or hold extra funds in an offset account, you should consider a standard variable rate loan. These additional products are generally included in a home loan package.
What are the BENEFITS of a Basic variable rate loan?
- Generally lower interest rate than Standard Variable Rate loans.
- Repayments may be lower, due to lower interest rate, than on a Home Loan Package.
- Redraw generally available (check if still available if interest only option taken).
- Usually unlimited higher repayments or special repayments allowed.
- Loan increases (Top Ups) generally allowed.
What are the DISADVANTAGES of a Basic variable rate loan?
- The Interest Rate is still a variable rate which is subject to market fluctuations.
- Lenders may increase/decrease rates independently of the Reserve Bank.
- All of the features of Home Loan Package may not be available. Such as offset accounts.
- You may not be able to split between part fixed and part basic variable.
- Loan fees may be higher than a standard variable rate facility, depending on the Lender.