For homeowners in Wantirna considering their home loan options, understanding variable rate loans and the power of extra repayments can significantly impact your financial future. These home loan features offer flexibility and potential savings that could help you achieve home ownership goals sooner.
Understanding Variable Interest Rate Home Loans
A variable interest rate home loan means your interest rate can change during the life of your loan. Unlike a fixed interest rate home loan, variable rates move up or down based on market conditions and your lender's decisions. This type of home loan product forms the foundation of many home loan packages across Australia.
Variable home loan rates typically offer several advantages:
• Access to offset account facilities
• Ability to make extra repayments without penalties
• Potential for interest rate discounts
• Flexibility to switch between principal and interest or interest only repayments
• Option to split your loan between variable and fixed portions (split loan)
Home Loan Features That Build Wealth
Modern variable rate home loan products come with features designed to help you build equity faster. An offset account is one of the most valuable home loan benefits available. This linked offset account works by reducing the interest charged on your loan amount based on the balance in your offset account.
For example, if you have a $500,000 owner occupied home loan and $50,000 in your mortgage offset account, you only pay interest on $450,000. This arrangement can save thousands in interest payments over the loan term while maintaining access to your funds.
The Power of Extra Repayments
Making additional repayments on your variable rate home loan can dramatically reduce both your loan term and total interest paid. Even small extra amounts can make a substantial difference over time.
Consider these scenarios for a $500,000 home loan with a variable interest rate:
• Standard repayments over 30 years
• Adding $100 monthly could save approximately 3-4 years
• Adding $200 monthly could save approximately 5-6 years
• Adding $500 monthly could save approximately 8-10 years
These extra repayments also help improve your borrowing capacity for future investments and reduce your loan to value ratio (LVR), potentially eliminating Lenders Mortgage Insurance (LMI) requirements.
Comparing Home Loan Options
When conducting a home loan rates comparison, consider the complete home loan package rather than just the interest rate. Many lenders offer rate discounts for new customers or those meeting specific criteria. Professional packages often provide interest rate discounts along with fee waivers and additional features.
Key factors to evaluate include:
• Current home loan rates across different lenders
• Available home loan features and benefits
• Fees and charges structure
• Offset account options
• Redraw facilities for extra repayments
• Portable loan features for future property moves
When to Consider Split Rate Options
A split rate home loan combines variable and fixed interest rates within one loan. This approach allows you to secure a portion of your loan at current fixed rates while maintaining the flexibility of variable rates on the remainder. This strategy can provide protection against rising rates while preserving access to variable rate benefits.
Planning Your Home Loan Application
Whether you're applying for your first home loan or considering home loan refinance options, understanding these features helps inform your decisions. First home buyers particularly benefit from variable rate loans due to their flexibility as income and circumstances change.
Calculating home loan repayments with extra payments included helps you understand the long-term impact of your strategy. Professional mortgage brokers can access home loan options from banks and lenders across Australia, ensuring you receive comprehensive comparisons.
Maximising Your Investment Strategy
For those looking to invest in property, variable rate loans on your owner-occupied property can help build equity faster through extra repayments. This increased equity improves your position when applying for investment loans or other property purchases.
The financial stability created through strategic extra repayments and offset account usage creates opportunities for portfolio growth and long-term wealth building.
Variable rate loans with extra repayment capabilities offer powerful tools for achieving your property and financial goals. The combination of flexibility, potential savings, and wealth-building features makes them an attractive option for many Wantirna residents.
Call one of our team or book an appointment at a time that works for you to discuss how variable rate loans and extra repayments could accelerate your path to financial security.