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Rate Description

Basic / Standard Variable Home Loan

Standard Variable Rate loans are the most popular type of loan, are based on the official Reserve Bank rate and, as the name suggests, will vary with time depending on the market. If rates go up so will your repayments and vice versa if they go down.

This type of loan is traditionally the most flexible and may include optional features such as the ability to make extra repayments, to redraw funds or to split your loan, just to name a few. It may also be possible to incorporate an introductory discounted rate with this type of loan. Introductory rates are usually effective for the first 12 months of the loan, at which it then reverts to the standard variable rate for a prescribed

Fixed Home Loan

If the certainty of set loan repayments appeals to you then perhaps a Fixed Rate loan is just what you need. Fixed Rate loans are based on a set term and interest rate, anywhere from 6 months to 10 years. This provides some level of security but does not allow the reduction of repayment amounts should official interest rates fall.

Once the fixed rate period is finished the rate will usually revert to a variable rate unless you decide to rollover for another fixed term. These loans can be combined with variable rate products to provide a mix of security and flexibility. For example 60% of your loan could be a standard variable loan whilst the remaining 40% could be fixed

Introductory / Honeymoon Home Loan

These types of loans offer a low interest rate usually for the 1st year of the loan. The rate may be fixed, variable or capped, meaning that if interest rates rise your rate will not go up, but if rates fall that rate will go down and you will benefit. Once the Introductory or Honeymoon period is finished the interest rate usually reverts to the standard variable rate.

The advantage of an Introductory Rate is that it offers borrowers a chance to reduce the principal quickly by making extra repayments. The main disadvantage is that most banks charge penalties if you discharge these types of mortgages within in first 3-4 years after settlement.

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