Variable rates explained

Which is better: fixed or variable?

A variable rate home loan is one where the interest rate will vary based on the market. If the Reserve Bank of Australia (RBA) puts the cash rate up, your interest rate will most likely rise too. If the cash rate goes down, so will your interest rate. Lenders offer it as an alternative to fixed-rate loans. If you go for a fixed-rate loan, the interest rate will remain the same for a set time, usually one, three or five years. Some experts point out that variable home loan rates are better in the long run. If the interest rate goes up, your interest will go up, too and so will your repayments. However, if it goes down, the interest rate will decrease and your repayments will also decrease. In this second case, you’ll end up paying less in the short term. There’s another thing to consider when choosing what type of rate to go for. When you take out a fixed-rate loan, the interest rate you get reflects the state of the market at that time. If the interest rates are on the rise when you get a loan, you’ll end up saving more than you would at a variable rate. Find a deal

The benefits of variable rate home loans

When interest rates are declining, your repayments will be lower. Variable rates can prove to be a good choice in this uncertain economic climate. With variable rate home loans, banks often offer extra features, too, such as:

• Unlimited redraws

on repayments made early. This allows you to withdraw any money you have deposited in advance from your account.

• An offset account.

The banks subtract the offset account balance from the mortgage account balance. This difference is the net balance for which they charge interest. As a result, your repayments will be lower. • The option to make extra repayments at no extra cost. This allows you to repay your loan faster if you have the means. If you do this, you will also save on interest.

• Charging less to change loans.

When you have a variable rate loan, changing to a different loan is easier. If you find a better loan somewhere else, it will cost you less to get out of your current deal.

The downsides of variable rate home loans

It’s the uncertainty of the market that makes taking out variable rate loans risky. If there’s a sudden increase in the rates, you will have to pay more to meet the terms and conditions of the loan. The negative aspects of these loans reflect onto your budget. First, it’s impossible to plan your spending in advance. Loan interest rates will often change, as will the value of your repayments. When you applied for a home loan, you planned according to your budget at the time. With rates on the rise, your payments will have to be larger. If your budget is still the same as it was then, you may even fall behind on your repayment schedule. How much can I borrow?Use UNO's calculator to estimate your borrowing capacity. Calculate Now

Calculating home loan repayments

With variable rate home loans, it’s difficult to determine how much the loan will cost you in the end. UNO’s home loan repayment calculator works on all loan types, including those with variable rates. You can enter the amount of your loan, its purpose, and its term. The calculator shows you how high your repayment instalments will be. You can also use it to compare different loans to find out which one gives you the best deal on the whole. Find a dealBook in a quick call with our customer care teamIt’s important to note that the information we give here is general in nature – no matter how helpful or relatable you find our articles. Even if it seems like we’re writing about you, it’s not personal or financial advice. That’s why you should always ask a professional before making any life-changing decisions.Book a call in with UNO

Book Call Now

UNO home loans

TESTIMONIALS

What our customers are saying

Gabe Windsor
October 26, 2023
What a fantastic experience using UNO Home Loans. Mike Parsons and the team were exceptional. Such an easy, hassle free experience, cannot recommend them highly enough. Mike Parsons was in touch every step of the way, and with him doing all the leg work, the transition to a refinanced home loan was a very easy one. Thank you!
Read more
Laurisa Sticotti
July 1, 2023
Scott Wilkinson has been fantastic when dealing with my broking needs. He has held my hand through every step of the way and has made purchasing my first home a much more comfortable experience than I anticipated.
Read more
Thusi Gamage
July 1, 2023
Awesome team, Very reliable and friendly. Scott Wilkinson is very experienced and knowledgeable.He guided us throughout the process and was available to help.
Read more
Omar Zazou
June 1, 2023
I have worked with Scott Wilkinson to get my home loan and he has been a massive help to navigate my first home purchase. He has taken care of all the financial details and I didn't need to worry about anything. Highly recommend him for his professionalism, patience and support!
Read more
Kelly O'Connor
June 1, 2023
You won’t find any broker better than Anita at UNO. We’ve told all our friends and family about her and will be using her for all our mortgages in the future! A stress free process from the start. She listened to our needs and was always available.
Read more
Ashley Morson
We are truly grateful for uno home loans and our broker Karis Churchill. This is our second time purchasing a home with the help from Uno and both times have been a very positive experience. Our recent purchase had many obstacles due to different factors however it was our dream home and we were up for the challenge. Our broker Karis was a true support and went above and beyond. She communicated so well with our solicitor and the real estate agents. She kept us updated through every step and kept us motivated when things seemed impossible. Uno is very fortunate to have Karis as a broker and we would highly recommend her to anyone. Our family are so happy we are now in our new forever home. Thank you so much Karis and to the uno team!!!
Read more
Ebubekir Demir
Thank you Eren for your quick and efficient turn around time to getting an approval for a loan. Will be recommending you to anyone that needs a quick and reliable loan.
Read more
No items found.