Product Insights: Basic Variable Rate Home Loans

By Matt McCombe

My neighbour is a hair products distributor for a large company here in Perth. I often wear hair gel so as you could imagine I enjoy receiving samples from time to time. Before meeting him I thought there was only one type of hair gel but I’ve since found out there is a myriad of different products available. Whether you want that styled ‘messed up’ look, the ‘wet’ look, the “able to be re-styled during the day” type style etc etc.

It’s a bit like that with mortgages; but loans don’t make me look cool or at least, my version of cool, like hair gel does!!

Although as a broker I sell hundreds of different products from over 40 lenders you can categorise most of those products into just a few categories in order to try and get a handle on what’s out there.

For the next few finance blogs I’m going to go into some detail about these home loan product categories. The first of those is Basic Variable Rates.

As the name suggests, these are variable rate home loans which means you get a lot of flexibility. You can pay them off more quickly without penalty (as long as you don’t fully discharge the loan) and your rate goes up and down with the Reserve Bank.

The word “BASIC” in Basic Variable refers to the fact that they are “no frills” home loan in that they usually don’t have an offset account or credit card attached to them. They are characterised by a low rate and low or no ongoing fees. Sometimes they will charge an application fee of around $600 but that’s usually it for the life of the loan.

They generally suit people who don’t have more than one loan account, who won’t use an offset account much and who like the benefits of a variable rate home loan. Of course it also attracts people who hate the idea of bank fees because there are relatively few bank fees with this type of loan.

There are always exceptions to the rule but this will hopefully help you understand this type of loan.

If you have any questions about mortgages, please be in touch! You can contact me by email on matt@extrememortgages.com.au or by phone on (08) 9400 6210.
Stay tuned for next week’s instalment!!