When a Variable Rate Home Loan Suits Kogarah Buyers

A variable rate home loan suits you when you want room to move. That might mean extra repayments, an offset account, or a change in your life down the track.

Around Kogarah, plenty of us work long shifts at St George Hospital or St George Private Hospital, or live close by and know someone who does. Pay can shift with rosters, locum work or a move from part-time to full-time. A loan that bends with you can be worth more than a rate that stays the same.

What Is a Variable Rate Home Loan?

A variable rate home loan has an interest rate your lender can raise or lower over time. Your repayments can change when the rate does.

That is the main trade-off. You gain flexibility, but you carry the risk that repayments rise. Lenders decide their own rates, and they do not always move in step with the Reserve Bank, so it pays to compare rates across lenders from time to time.

Most variable loans let you make extra repayments, and many can be paired with a linked offset account. Fixed rate loans often limit both.

How Do Variable Rate Repayments Work?

Repayments on a variable loan are worked out from your loan amount, your interest rate and your loan term. If the rate changes, the lender recalculates your minimum repayment.

Take a worker with a $600,000 loan over 30 years on a principal and interest basis. At an illustrative rate of 6.75% a year, the repayment is about $3,892 a month. That rate is an example only, and your own rate will depend on your deposit, your lender and your loan features. You can test your own numbers with a repayment calculator, or ask us to run them with you.

Can an Offset Account Cut the Interest You Pay?

Yes. An offset account reduces the balance your interest is charged on, which lowers the interest you pay while keeping your savings available.

Consider a hospital worker with the $600,000 loan above at 6.75% (illustrative). They keep $40,000 in a linked offset account for emergencies and a car replacement. Interest is charged on $560,000 rather than $600,000. That is about $225 less interest in a month, or roughly $2,700 over a year if the balance stays in place. Their repayment stays the same, so more of each payment goes to the loan balance.

The cost to check is the package. Some loans with offset accounts carry a higher rate or an annual fee, so the saving only works if your offset balance is large enough to outweigh it. If you rarely keep spare cash, a basic variable loan may suit you more.

Variable Rate or Fixed Rate: Which One Fits Your Situation?

A variable rate suits you if you expect to make extra repayments, want an offset account, or might sell or refinance. A fixed rate suits you if you need repayments that stay the same for a set period.

The cost of fixing is that you may face break costs if you leave early, and extra repayments are often capped. The cost of staying variable is that your repayments can rise. If you already have a fixed loan ending soon, our fixed rate expiry page explains what your options are when it rolls over.

Is a Split Loan a Sensible Middle Path?

A split loan divides your borrowing into a fixed part and a variable part. It gives you some certainty and some flexibility.

For example, you might fix half the loan so part of your repayment stays steady, and keep the other half variable so you can add extra repayments or use an offset. The trade-off is that you manage two balances, and the fixed portion carries the same limits as any fixed loan. It can suit a household where one income is less predictable.

Choosing Between Interest Only and Principal and Interest

Principal and interest repayments reduce your loan balance as you go, while interest only repayments cover just the interest for a set period. Interest only repayments are lower at first, but the balance does not fall during that time.

When the interest only period ends, repayments switch to principal and interest over a shorter remaining term, so they usually jump. For most owner occupied home loans, principal and interest is the usual choice, because it builds equity from the first repayment. Interest only is more often used for investment, and our investment loans page covers that side.

Getting Ready to Apply for a Home Loan

Before you apply, it helps to know how much you can borrow and which loan features matter to you. A home loan pre-approval gives you an idea of your budget before you make an offer.

Our borrowing capacity page explains what lenders look at, including income, living costs and existing debts. If this is your first home loan, our first home buyers page covers the extra points worth knowing. With a smaller deposit, ask us about Lenders Mortgage Insurance, because it adds a cost to the loan.

Already Have a Variable Loan? Check It Still Fits

If you already have a variable loan, it is worth checking your rate and features now and then. Rates can differ between lenders and between new and existing customers, so it is worth checking your rate and asking your lender or broker.

A quick loan health check shows whether your rate, fees and features still suit you. If they do not, refinancing may be an option, though switching can involve fees and a new application. We will tell you plainly if staying put is the right call.

Our home loans page shows the range of loans we can access from lenders on our panel. Call one of our team or book an appointment at a time that works for you, and we will talk it through over a coffee or a phone call, whichever suits your roster.

Frequently Asked Questions