Unlock the Benefits of Variable Rates and Extra Repayments

Understanding Variable Rate Home Loans for First Home Buyers

When buying your first home in Epping, one of the most important decisions you'll make is choosing between a fixed interest rate and a variable interest rate. Variable rate loans offer flexibility that can be particularly valuable for first home buyers looking to pay off their mortgage faster.

A variable interest rate fluctuates based on market conditions and lender decisions. When rates decrease, your repayments become more affordable. When rates increase, you'll pay more. This uncertainty might seem daunting, but variable rate loans come with features that can significantly benefit your financial position.

The Power of Making Extra Repayments

One of the most attractive features of variable rate loans is the ability to make extra repayments without penalty. This means you can pay more than your minimum monthly repayment whenever you have surplus funds available.

Here's how extra repayments benefit you:

• Reduce your loan principal faster: Every dollar you pay above the minimum goes directly towards reducing your loan balance
• Save on interest costs: The less you owe, the less interest you'll pay over the life of your loan
• Shorten your loan term: Extra repayments can help you own your home years earlier than scheduled
• Build equity quicker: As your loan balance decreases, your equity in the property increases

For example, if you have a $500,000 home loan with a variable interest rate and you make an extra $500 in repayments each month, you could potentially save tens of thousands of dollars in interest and reduce your loan term by several years.

How First Home Buyers in Epping Can Access Low Deposit Options

Many first home buyers worry about saving a large deposit. Fortunately, there are several low deposit options available that can help you enter the property market sooner:

• 5% deposit: Through the First Home Loan Deposit Scheme, eligible first home buyers can purchase with just a 5% deposit
• 10% deposit: Many lenders offer home loan options with a 10% deposit, though you may need to pay Lenders Mortgage Insurance (LMI)
• Gift deposit: Some first home buyers use funds gifted by family members to increase their deposit

Understanding first home buyer eligibility criteria and available first home buyer grants can make a significant difference in your first home buyer budget. In NSW, you may also qualify for first home buyer stamp duty concessions, which can save you thousands of dollars.

Offset Accounts vs Redraw Facilities

When considering home loan options for your first home loan application, you'll encounter two valuable features: offset accounts and redraw facilities. Both can help you save on interest, but they work differently.

Offset Account:
An offset account is a transaction account linked to your home loan. The balance in this account offsets your loan balance when calculating interest. For instance, if you have a $400,000 loan and $20,000 in your offset account, you'll only pay interest on $380,000.

Benefits include:

• Instant access to your funds
• Reduces interest without making formal extra repayments
• Maintains flexibility for unexpected expenses
• No impact on your ability to redraw funds

Redraw Facility:
A redraw facility allows you to access extra repayments you've made on your home loan. If you've paid an additional $10,000 above your minimum repayments, you can typically withdraw these funds if needed.

Considerations:

• Some lenders charge redraw fees
• Minimum redraw amounts may apply
• Access might take a few business days
• May affect your first home buyer budget planning

Securing Pre-Approval and Understanding Interest Rate Discounts

Before you start house hunting in Epping, it's wise to get pre-approval for your first home loan. Pre-approval gives you confidence about your borrowing capacity and shows sellers you're a serious buyer.

During your first home loan application, discuss interest rate discounts with your broker. Many lenders offer discounts off their standard variable interest rate for:

1. Borrowers with larger deposits
2. Professional package customers
3. First home buyers using government schemes
4. Borrowers who meet specific lending criteria

These discounts can save you thousands over the life of your loan, making them worth investigating when you apply for a home loan.

Government Support: First Home Buyer Grants and Schemes

The Australian Government and NSW State Government offer several initiatives to support first home buyers:

First Home Owner Grants (FHOG):
Depending on the property you're purchasing and its value, you may qualify for grants that provide direct financial assistance.

Regional First Home Buyer Guarantee:
While Epping is considered a metropolitan area, understanding the full range of schemes helps you make informed decisions about where to buy.

First Home Super Saver Scheme:
This scheme allows you to save for your deposit inside your superannuation fund, where you'll benefit from concessional tax rates. You can then withdraw these savings (plus deemed earnings) to put towards buying your first home.

Making Variable Rates Work for Your Financial Future

Variable rate loans suit first home buyers who:

• Want the flexibility to make extra repayments without penalty
• Expect their income to increase over time
• Can manage slight fluctuations in repayment amounts
• Plan to pay off their loan faster than the standard term
• Want access to features like offset accounts

For first home buyers in Epping, where property values reflect strong market fundamentals, a variable rate loan with extra repayment capability can be an excellent choice. This approach allows you to take advantage of lower rates when they occur while building equity faster through additional payments.

Tips for Managing Your Variable Rate Home Loan

To maximise the benefits of your variable rate loan:

• Set up automatic extra repayments: Even small additional amounts add up over time
• Use salary increases wisely: Direct pay rises towards extra repayments
• Maximise your offset account: Keep savings in your offset rather than separate accounts
• Review your interest rate regularly: Ensure you're still receiving competitive rates
• Create a buffer: Build up extra repayments as protection against rate rises

Remember that while Lenders Mortgage Insurance (LMI) might be required for low deposit options, the ability to make extra repayments means you can potentially reach 20% equity sooner and refinance to remove this cost.

Your First Home Buyer Checklist

As you prepare to apply for a home loan, ensure you have:

• [ ] Reviewed your first home buyer budget
• [ ] Researched first home buyer eligibility requirements
• [ ] Investigated first home buyer stamp duty concessions
• [ ] Understood the difference between fixed interest rate and variable interest rate options
• [ ] Compared home loan options including offset and redraw features
• [ ] Calculated potential savings from extra repayments
• [ ] Gathered documentation for your home loan application
• [ ] Considered getting pre-approval before house hunting

The team at Simple Lending specialises in helping first home buyers in Epping understand their options and find the right loan structure. Whether you're considering a 5% deposit scheme or want to understand how extra repayments could benefit your situation, professional guidance makes the process more manageable.

Variable rate home loans with extra repayment features offer first home buyers the perfect combination of flexibility and control. By making additional repayments whenever possible, you can build equity faster, reduce interest costs, and potentially own your Epping home years earlier than planned.

Call one of our team or book an appointment at a time that works for you. We'll help you understand your home loan options, work through your first home buyer checklist, and find a loan structure that supports your long-term financial goals.