Variable home loans are very common loans offered by lenders and bankers. Most first time home buyers take this loan. This type of loan start with a lower interest rate and after a fixed time, the rate fluctuates according to the market index, as set by the Reserve Bank. It means the interest rates move up or down with the market. The basic variable loans in general have fewer loan features than the general loans. Generally, repayment term is upto thirty years. The features and rates offered by different lenders depend on the amount you are borrowing, your credit score and some other factors. 

 

Pros and cons of variable interest rate loan

Some of the advantages of variable interest rate home loans are:

•    Flexibility: It has some flexible features, like having options of making additional payments, low introductory interest rates or redrawing facility.
•    Option of lower repayment: As the interest rate varies with that of the market index, if the rate falls, the amount of repayment also becomes lower.
•    Faster paying off the loan: This type of loan also has the option of paying extra as advance towards the loan. Thus, every month, if you pay an extra amount in addition to your minimum payment amount, you can repay the loan faster.
•    Helps in budgeting: As this loan gives you the option of weekly, fortnightly or monthly repayment, you can maintain your budget accordingly.
•    Option of redrawing: This type of loan gives option of redrawing the additional amount you have made towards the repayment, in addition to the minimum repayment amount.
Some of the disadvantages of variable interest rate home loans are:
•    Repayment may become more: If the interest rate rises, the amount of monthly repayment also becomes more and it may become more than the amount you can afford. 
•    Interest rate generally rises: Generally, the interest rate rises than it was in the initial period, when the loan was taken.
•    Fewer features: It offers fewer features than the general loans.
Prior to opting for variable home loans, you should weigh the pros and cons of it mentioned above and find out whether or not this type suits you the best

 

Compare Variable Rate Home Loans >>

Home Loan Comparison interest rates in this table are based on a loan amount of $150,000 and a term of 25 years.