These loans have interest rates that, over the full life of the loan, track the interest rate movement set by the Reserve Bank of Australia . In a nutshell you are banking on the fact that interest rates will fall, or at best remain constant.
The two types of variable loans are:
- Standard, and;
- Basic Variable.
Positives of a Variable Rate Loan
You are able to make any extra payments at any time, reducing the daily loan balance of which the interest is calculated on. Should you be contemplating discharging your loan within a short period, then a variable rate is a definite option.
Variable rates are generally cheaper than fixed rates. The flexibility in repayment without penalty is handy if you want to pay off your mortgage earlier and reap substantial savings in interest.
- Good option for borrowers who can allow for a marginal rate increase but wish to benefit if rates decrease;
- The flexibility in repayment without penalty is handy if you want tot pay off your mortgage earlier and reap substantial savings in interest.
