Basic variable home loans are stripped down versions of standard variable home loans. They offer certain advantages over standard loans, mainly a lower rate of interest and hence lower monthly payments, an important consideration for many borrowers.
Typically, basic variable home loans offer significant savings over the life of the loan, often an interest rate which can be a half per cent lower than standard variable loans. Consequently they remain popular with first home buyers and budget-conscious borrowers.
In exchange for the lower interest rate they tend to offer less flexibility and fewer options than other types of home loans. They usually lack portability, meaning you cannot take them with you if you sell your house and buy another one. In some cases, borrowers must pay fees to access additional features standard on other types of loans. Some lenders do not allow extra repayments or redraw facilities on their basic loan product.
Basic variable home loans, the pros:
- Lower interest rates than standard variable loans – typically lower by 0.5%
- Lower monthly repayments
- If interest rates drop, repayments drop
Basic variable home loans, the cons:
- Lack the flexibility of standard variable loans
- Have fewer features
- If interest rates rise, repayments rise
- Many basic variable loans do not offer offset accounts or a split loan facility
- Watch out for monthly account fees and charges
Again, it is crucial to shop around. Some lenders do offer more features than others, including redraw facilities, direct salary credits, portability and repayment options. As the features offered can vary considerably between lenders this is an area where we can help you find the best basic variable home loans product that meets your exact needs.