Apr 27, 2020  | Tags: banking, debt, lender, refinance

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Variable rate loans

Variable interest rate loans are where the interest rate moves up or down as the market moves. If the interest rate drops, then your repayments will drop as well. However, in the event of an interest rate rise, your repayments will also increase. You can choose a Basic variable loan which usually comes with no application fee no,monthly fees etc and just serves the purpose of helping you purchase a home.

Other variable rate loans come with additional features, which can reduce the amount of interest paid over the life of the loan. For example, a variable rate loan with a 100% offset arrangement links your loan account to your savings account. Any funds held in your savings account are offset against the borrowed amount, reducing the interest you have to pay.

These loans are usually called Package Loans and are accompanied by an annual fee ranging from $120 to the more common amount of $395. With a variable loan you can usually make unlimited extra repayments which of course reduces the amount of interest you will pay over the loan term.

Fixed rate loans

A fixed rate loan is one where the interest rate is fixed for a limited period, commonly 2,3, or 5 years. These types of loans are great for borrowers who want to know what their commitments are every month. If interest rates rise during the fixed term the borrower is protected for the period of the fixed term. Conversely if rates were to decrease then the borrower is locked in to the contract for the remaining term and can only opt out by breaking the contract which potentially can cost many thousands of dollars. Also, most banks will only allow a certain amount of extra in repayments over the fixed term, that amount usually around $25K.

Split rate loans;

A split rate loan is when you break your mortgage into two loans – one with a fixed rate and one with a variable rate. Most banks will allow you to split your loans from the outset, without having to pay for two separate loan applications. Choosing the right kind of loan depends on your personal situation, earning capacity and long-term goals for your property. Speaking with a mortgage specialist at Calder Finance , can help you to figure out the best way forward, and could help you save money along the way.

Talk to an expert

An experienced mortgage broker can draw on their market experience to give you crucial advice as well as helping you find the best possible loan deal.

Calder Financing Broking can find you the best deal for your needs, and guide you through the process.

Contact the team or call directly on 08 8373 3333 to meet an experienced broker today for a free, no obligations discussion about your needs.

Written and Supplied by Cliff O'Connell of Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.