Home Loan Types
Standard Variable Rate
The Standard Variable Rate mortgages are one of the most popular home loans in Australia today. As the name suggests the interest rate on these types of loans varies in line with the Reserve Bank of Australia’s (RBA) official cash rate. When the RBA increases the official cash rate, the home loan rates generally follow and increase. When the RBA reduces the official cash rate the home loan rates follow and fall, and this results in a fluctuating (variable) monthly repayment.
This loan type generally has greater flexibility and the option of added features, such as; extra repayments without penalty redraw facility, it can be split with other loans, and offset accounts can be linked. The loan term is generally 25-30 years. ??
Also Introductory or Honeymoon periods can be offered with these loans, where a lower interest rate is offered for an introductory period of 6 months to 1 or 2 years, then the interest rate reverts back to the standard variable rate for the rest of the loan term.
Basic Variable Rate
These types of mortgages are becoming more popular and are offered by most lenders. The basic or no frills mortgage generally has a lower interest rate and lower costs than the standard variable rate loans and has less flexibility and features, although there some of the “no frills” home loans now that have a lot more of the options of other loans. The interest rate is variable so it can fluctuate, up and down.