Variable Rate Home Loans
Variable rate home loans allow you to take advantage of falling interest rates. With a variable rate loan the interest rate you pay on your home loan varies with the interest rate that is set by the reserve bank of Australia, this means that if interest rates fall so does the interest you pay on your home loan. Conversly, the down side is if interest rates rise you will be paying more interest on your home loan. Here we take a look at situations where you would consider taking out a variable rate home loan.
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Choosing Between Variable Rate Home Loans
When your looking to take out a home loan you generally have two choices of interest rates, variable rate loans and fixed rate loans. When considering which loan type to take out, it is important to consider how you foresee interest rates, whether you think they are going to rise or fall. If you believe that interest rates are going to rise, then it may be more beneficial for you to consider a fixed rate loan, but if you think that interest rates are likely to fall, then it may be more beneficial for you to take out a variable rate loan.
Which Variable Loan to Choose
With so many mortgage providers offering variable rate home loans it can be hard to choose which loan is right for you. When considering a variable rate loan you should consider if it is the best option for your situation now and in the future. It is important to consider what impact an interest rate rise will have on your situation, can you cover the extra repayments?
Is a Split Variable Home Loan a Good Option?
Consider taking out a split variable loan with a partly fixed portion. Having a portion of your loan in a fixed interest situation allows you some protection should interest rates rise, whilst giving you the benefit of a variable rate for the remaining portion should interest rates fall.