Basic Variable
This is about as simple as it gets when it comes to home loans, which probably explains why the basic variable is often called a ‘no-frills’ loan. These loans generally offer the lowest interest rates, which are variable, but can be light on features.
Many – but not all – basic variable loans do not allow the borrower to, for example, make extra repayments, redraw on these funds, or to take advantage of a mortgage offset account by having their salary paid directly into their loan account. These loans are closely linked to rates set by the Reserve Bank of Australia (RBA), so official rises or falls will affect basic variable rates.
These loans have the advantage of lower interest rates, but on the downside, their lack of flexibility might not suit borrowers who want to pay off their loan quickly through increased payments, mortgage offsets and other strategies. Despite its disadvantages, the basic variable is a popular loan type, particularly with homebuyers or investors who plan to meet their minimum monthly payments over the term of their loan, and have little use for flexible features – but still want competitive rates. The simplicity of these loans, along with their generally lower rates, makes them particularly popular with people on tight budgets and with many first home buyers.
Be aware that what some lenders call their basic variable loan can in fact come with a reasonable raft of features, and there can be significant differences between the many basic variable loans on offer. At Mortgageport we can help you find the one that’s best for you.
