Variable Residential Loans

Variable rate home loans can generally be categorized into Basic Variable and Standard Variable loan products. These two loan types are effectively the same in the way they work. The only differences are in the interest rate charged, and the features available. A standard variable loan will usually have a full range of features, whilst a basic variable loan will have a more restricted range.

A summary of the usual differences is set out below. Please note that this is a general guide, and that differences between lenders may arise with specific products.

A third category of variable home loans are loans with introductory interest rate discounts. They are normally a variant of a banks Basic variable loan product, and offer new customers a reduced or discounted rate of interest for a set time. These discount periods can range from 6 months to 24 months, after which the interest rate reverts to the Standard Variable Rate. In order for the Lender to ensure that they recoup the cost of the discount and to discourage borrowers from continually changing from introductory products of various lenders, most have introduced penalties should the borrower repay/switch the facility within a specific time.

FEATURE STANDARD VARIABLE BASIC VARIABLE
Redraw YES YES
Extra Repayments YES YES
Ability to change to fixed rate YES YES
Discounts available for higher loan amounts YES NO
Mortgage Offset Account YES NO
Line of Credit option YES NO