Top Variable Rate Features to Consider for First Homes

Buying your first home in Davoren Park is an exciting milestone, and choosing the right home loan features can make a significant difference to your financial situation. Variable interest rate loans offer flexibility and features that many first home buyers find valuable. Understanding these features will help you make informed decisions when you apply for a home loan.

Understanding Variable Interest Rates

A variable interest rate fluctuates based on market conditions and lender decisions. Unlike a fixed interest rate that remains constant for a set period, variable rates can move up or down throughout the life of your loan. This flexibility comes with several beneficial features that can help you manage your first home loan more effectively.

When you apply for a home loan with a variable rate, the interest rate changes are typically tied to the Reserve Bank's official cash rate movements. While this means your repayments can increase, they can also decrease, potentially saving you money when rates fall.

Key Variable Rate Loan Features

Offset Account Benefits

An offset account is one of the most valuable features available with variable rate loans. This is a transaction account linked to your home loan where the balance reduces the interest charged on your mortgage. For example, if you have a $400,000 home loan and $20,000 in your offset account, you only pay interest on $380,000.

For first home buyers building their savings, an offset account provides flexibility while reducing interest costs. You maintain full access to your funds while they work to lower your loan interest.

Redraw Facility Advantages

A redraw facility allows you to access additional repayments you've made on your home loan. If you've been making extra payments beyond your minimum requirement, you can withdraw these funds when needed. This feature provides a safety net for unexpected expenses while helping you pay down your loan faster when times are good.

When considering your first home buyer budget, a redraw facility offers financial flexibility without locking away your extra payments permanently.

Making Extra Repayments

Variable rate loans typically allow unlimited extra repayments without penalties. This feature is particularly valuable for first home buyers who receive bonuses, tax refunds, or other windfalls. By making additional payments, you can:

• Reduce your loan principal faster
• Save thousands in interest over the loan term
• Build equity in your property more quickly
• Potentially pay off your loan years earlier

Interest Rate Discounts and Incentives

Many lenders offer interest rate discounts for first home buyers, particularly those using government schemes like the First Home Loan Deposit Scheme or Regional First Home Buyer Guarantee. These discounts can reduce your interest rate by 0.10% to 0.50% or more, resulting in substantial savings over time.

Some lenders also provide discounts for:

• Professional package customers
• Borrowers with higher deposits
• Those who consolidate other banking products
• First home buyers who meet specific criteria

Low Deposit Options with Variable Rates

Variable rate loans often accommodate low deposit options, making them accessible for first home buyers. Whether you're considering a 5% deposit through the First Home Loan Deposit Scheme, a 10% deposit, or using a gift deposit from family, variable rates provide flexibility.

Lenders Mortgage Insurance (LMI) typically applies when borrowing more than 80% of the property value. However, various schemes and LMI waivers may be available for eligible first home buyers, particularly when combined with government guarantee schemes.

Loan Portability Features

Variable rate loans often include portability, allowing you to transfer your loan to a new property if you decide to move. This feature maintains your existing loan terms and can save you money on discharge and establishment fees. For first home buyers who might need to relocate for work or family reasons, this flexibility is valuable.

Split Loan Arrangements

Many lenders allow you to split your loan between variable and fixed portions. This strategy provides:

• Security of fixed repayments on one portion
• Flexibility and features of variable rates on another
• Protection against significant rate increases
• Ability to make extra payments on the variable portion

This approach can be particularly suitable for first home buyers who want some certainty while maintaining access to variable rate features.

Government Support and Variable Rates

First home buyers in South Australia can access various support measures regardless of whether they choose variable or fixed rates:

• First home owner grants (FHOG)
• First home buyer stamp duty concessions
• First home super saver scheme contributions
• Regional first home buyer guarantee opportunities

These benefits can significantly improve your first home buyer eligibility and reduce upfront costs when buying your first home.

Understanding Your Home Loan Application

When preparing your first home loan application, gather documents that demonstrate your financial position:

1. Recent payslips and employment details
2. Tax returns if self-employed
3. Savings history and deposit source evidence
4. Identification documents
5. Details of existing debts and commitments

Obtaining pre-approval gives you confidence when making offers and shows sellers you're a serious buyer. Variable rate loans typically offer flexible pre-approval terms that can adjust if rates change before you find your property.

Creating Your First Home Buyer Checklist

As you explore home loan options, develop a comprehensive first home buyer checklist that includes:

• Research different lenders and their variable rate features
• Calculate your borrowing capacity and budget
• Understand deposit requirements and available concessions
• Compare interest rates and loan features
• Review offset account and redraw terms
• Assess annual fees and ongoing costs
• Consider loan flexibility for your circumstances

This systematic approach ensures you understand all aspects of your home loan before committing.

Comparing Variable Rate Products

Not all variable rate loans are created equal. When comparing products, look beyond the interest rate to examine:

• Offset account functionality and fees
• Redraw facility terms and conditions
• Extra repayment allowances
• Loan splitting options
• Ongoing account fees
• Package discounts available
• Customer service and support quality

A slightly higher interest rate with superior features might provide better value than a lower rate with limited flexibility.

Working with Simple Lending

At Simple Lending, our mortgage broking team understands the unique needs of first home buyers in Davoren Park. We work with multiple lenders to find variable rate products that match your circumstances, helping you access features that support your financial goals.

Our service includes:

• Comparing home loan options across numerous lenders
• Explaining variable rate features in plain language
• Assisting with your first home loan application
• Managing the approval process from start to finish
• Ongoing support throughout your home ownership journey

Call one of our team or book an appointment at a time that works for you. We'll help you understand which variable rate loan features align with your first home buyer goals and find a solution that supports your journey into home ownership.