What First Home Buyers Need to Know About Variable Rates

Understanding Variable Rate Home Loans

When you're buying your first home, choosing between a variable interest rate and a fixed interest rate can feel overwhelming. Variable rate loans are one of the most popular home loan options in Australia, offering flexibility that many first home buyers find valuable as they begin their property journey.

A variable interest rate means your rate can move up or down based on market conditions and lender decisions. Unlike a fixed interest rate that stays the same for a set period, variable rates fluctuate throughout the life of your loan. This can work in your favour when rates decrease, but it also means your repayments could increase if rates rise.

Key Features of Variable Rate Loans

Variable rate home loans typically come with features that can help you manage your mortgage more effectively:

• Offset account: This transactional account links to your home loan, with the balance offsetting the amount you owe and reducing the interest you pay
• Redraw facility: Allows you to access extra repayments you've made, providing financial flexibility when unexpected expenses arise
• Unlimited additional repayments: Make extra payments whenever you can without penalty, helping you pay off your loan faster
• Split loan options: Combine variable and fixed portions within the one loan to balance flexibility and certainty

These features make variable rate loans particularly attractive for first home buyers who want the ability to adjust their repayment strategy as their financial situation changes.

Variable Rates for Hobart First Home Buyers

If you're purchasing property in Hobart or surrounding areas like Moonah, Rokeby, or Mornington, understanding how variable rates work is essential for your first home loan application.

Tasmania's property market has unique characteristics, and your mortgage broker can help you find home loan options suited to the local conditions. Variable rates allow you to take advantage of potential interest rate discounts and competitive pricing as the market shifts.

Low Deposit Options with Variable Rates

Many first home buyers worry about saving a large deposit, but variable rate loans work with various deposit levels. Here are your options:

1. 5% deposit: Available through the First Home Loan Deposit Scheme or Regional First Home Buyer Guarantee, helping you avoid Lenders Mortgage Insurance (LMI)
2. 10% deposit: Common choice for first home buyers, though LMI usually applies
3. Gift deposit: Family contributions can count toward your deposit under certain conditions
4. Higher deposits: Providing 20% or more typically means you won't pay LMI

With a variable rate loan, these low deposit options remain available while you maintain the flexibility to make additional repayments as your income grows.

First Home Buyer Support in Tasmania

When applying for a home loan as a first home buyer in Hobart, you may be eligible for several government schemes and concessions:

• First home owner grants (FHOG) in Tasmania
• First home buyer stamp duty concessions that reduce upfront costs
• First Home Super Saver Scheme, allowing you to save through your super fund
• Regional First Home Buyer Guarantee for properties in eligible areas

Your first home buyer eligibility for these programs doesn't depend on choosing variable or fixed rates. However, variable rates give you more flexibility to maximise these benefits through accelerated repayments when you receive grant money.

Building Your First Home Buyer Budget

Creating a realistic first home buyer budget requires understanding how variable rates affect your repayments. Unlike fixed rates where you know exactly what you'll pay, variable rates mean your monthly payment can change.

When preparing your first home buyer checklist, factor in:

• Current variable interest rate offerings from multiple lenders
• Potential rate movements based on economic forecasts
• Your ability to handle modest increases in repayments
• Additional costs like property insurance, rates, and maintenance
• Features you want, such as an offset account or redraw facility

Having a buffer in your budget provides peace of mind if rates increase during your loan term.

The Pre-Approval Process

Obtaining pre-approval gives you clarity on how much you can borrow and strengthens your position when making an offer. The pre-approval process for variable rate loans involves:

1. Gathering documentation about your income, expenses, and financial position
2. Meeting first home buyer eligibility criteria set by lenders
3. Demonstrating your ability to service the loan at current variable rates
4. Understanding your borrowing capacity based on interest rate assessments

Pre-approval typically lasts 3-6 months, giving you time to find the right property while knowing your first home loan application has conditional approval.

Variable Rates vs Fixed Rates

While this article focuses on variable rates, understanding the comparison helps you make informed decisions:

Variable Rate Advantages:

• Potential to benefit from rate decreases
• Flexible repayment options and features
• Usually no break costs if you want to refinance
• Often lower rates during competitive market periods

Fixed Rate Considerations:

• Certainty of repayments for the fixed period
• Protection if rates increase
• Limited flexibility with additional repayments
• Break costs may apply if you exit early

Some first home buyers choose a split loan structure, combining both variable and fixed portions to balance certainty with flexibility.

Making Additional Repayments

One of the most valuable features of variable rate loans is the ability to make unlimited additional repayments. Even modest extra payments can significantly reduce your loan term and interest costs over time.

For example, paying an extra $100 per week on a $500,000 loan could save you tens of thousands in interest and reduce your loan term by several years. With an offset account, simply keeping your savings linked to your loan achieves similar results without formally making extra repayments.

Working with Simple Lending

Navigating home loan options as a first home buyer requires expertise and local knowledge. Understanding variable interest rates, first home buyer grants, stamp duty concessions, and the various schemes available can be complex when you're purchasing your first property.

Simple Lending specialises in helping first home buyers across Hobart and Tasmania. We compare multiple lenders to find variable rate loans with competitive pricing and the features that suit your circumstances. Whether you're working with a 5% deposit, 10% deposit, or have saved more, we'll guide you through the first home loan application process.

Our team understands the local property market in areas like Glenorchy, Claremont, and Howrah, and can explain how variable rates work in the context of Tasmania's unique market conditions.

From understanding your first home buyer budget to navigating LMI requirements and accessing government schemes, we're here to support you at every stage. We'll help you understand when variable rates make sense, how to use features like offset accounts effectively, and what your obligations are throughout the life of your loan.

Ready to explore variable rate home loans for your first home purchase in Hobart? Call one of our team or book an appointment at a time that works for you. We'll assess your situation, explain your options clearly, and help you move forward with confidence on your journey to homeownership.