• Standard variable loans are the most popular home loan in Australia. Interest rates go up or down over the life off the loan depending on the official rate set by the Reserve Bank of Australia and funding costs. Your regular repayments pay off both the interest and some of the principal.

    You can also choose a basic variable loan, which offers a discounted interest rate but has fewer loan features, such as a redraw facility and repayment flexibility.

    Pros

    If interest rates fall, the size of your minimum repayments will too.

    Standard variable loans allow you to make extra repayments. Even small extra payments can cut the length and cost of your mortgage.

    Basic variable loans often don’t come with a redraw facility, removing the temptation to spend money you’ve already paid off your loan.

    Cons

    If interest rates rise, the size of your repayments will too.

    Increased loan repayments due to rate rises could impact your household budget, so make sure you take potential interest rate hikes into account when working out how much money to borrow.

    You need to be disciplined around the redraw facility on a standard variable loan. If you dip into it too often, it will take much longer and cost more to pay off your loan.

    If you have a basic variable loan, you won’t be able to pay it off quicker or get access to money you have already repaid if you ever need it.

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