Fixed-rate loans allow you to fix your interest rates and repayments for an agreed period of time. This is generally set for one to five years, but can be up to seven years. At the end of the fixed term period, the loan will generally revert to a variable loan or you may choose to roll over for another fixed term at the rates applicable at that point in time. This is also a good time to review your overall financial position, and see what other loan offers are available.

Many clients like the fact that these loan repayments will not change during this period and with absolute certainty, they can budget their repayments.

The interest rate in a variable interest loan is, as you may have guessed, variable. The interest rate charged by your lender may vary throughout the life of the loan according to market conditions and indicators such as the Reserve Bank of Australia’s cash rate.

In other words, the repayments associated with the loan can also go up or down at any time. Many variable loans now offer a wealth of features such as an offset account or the ability to make extra repayments and redraw funds. Some institutions also offer basic or ‘no-frills’ variable loans with a lower interest rate but fewer features.

You'll often hear the media refer to the “standard variable interest rate” or SVR. This a benchmark rate, used by banks and lenders. These rates are not what customers usually pay, as they are typically only referenced rates and they are certainly not the rate a lender will offer you. When a lender says they will give you a discount of 1%, they are discounting off the SVR.

The amount of your loan will generally have a direct relationship to the amount of discount offered. If you decide to choose a variable interest home loan, a lender will generally offer you a discount on the variable rate anywhere between 0.10% and 0.70%, depending on the size and features of the loan. Larger loans with low LVRs can attract a discount of up to 1.4%. 

Categories of variable interest rate loans are the basic variable rate loans, which often feature lower interest rates. These loans tend to have limited features, although most will give you an option to redraw.

Honeymoon and introductory loans offer you a lower interest rate, discounted from the standard variable rate at the beginning of your loan. This can assist you in the first few years of your loan; however, honeymoon rates tend to revert to a higher variable rate at the end of the term.

Often, clients then consider a refinance option but please remember that there are costs involved in refinancing.

They are usually variable rate loans that only last for a short ‘introductory’ period of around one year although the term can vary from six months to up to three years. Sometimes these rates may be fixed or capped during the agreed time period.

To understand offset account benefits, you must first understand that the interest rate payable on your home loan is calculated every day.

An offset account is a separate savings account directly linked to your home loan. The balance held in the offset account is offset daily against the loan eg $330,000 loan balance – $20,000 offset balance – interest is calculated on that day at 310,000

The account is usually only available with a variable rate loan and not on basic, low-interest loan. To maximize the benefit of your offset account, you would deposit your pay in to the offset and receive a deduction on the interest due on your loan. This interest saving is then used to reduce the outstanding principal or debt.

If you have a Viridian line of credit, you have the freedom and flexibility to withdraw funds from your home loan up to the agreed limit, or increase your home loan balance to access additional funds. This option is ideal for smaller renovations to your home.

These are packages offered by lenders that, for the payment of an ongoing fee, offer a range of discounts and special features on their products. The main features are:

• Discounted interest rate
• Fee-free offset account
• Annual fee free credit card

Other features vary between lenders.

Redrawing on your existing home loan is a fast and easy option. If you have an existing variable rate home loan and you’ve made additional repayments on your mortgage, you may be able to redraw those funds to use for any purpose.

Yes, there are fees involved with every refinance. 

Fortunately, they're not exorbitant. There will be a “discharge fee" from your outgoing lender, a government fee (in Victoria) of approximately $225, and there may be an establishment fee for the new lender. All up it usually costs around $750. 

When you refinance your loan, you may get a better rate, and a better loan product but it is important to factor the fees into your refinancing equation. If you're going to save thousands of dollars in interest and reduce your monthly repayments at the same time, refinancing your home loan is worth the effort. But you need to be sure that making the switch will be financially viable for you before you sign on the dotted line.

From time to time lenders will offer incentives to refinance. This may be in the form of a cash bonus . At present a number of the major lenders are offering up to $1,500 cash back to refinance to them. This incentive needs to be factored into the overall assessment of whether a refinance is the best option for you.

Home owners and investors may wish to refinance for various reasons:

• to take advantage of a better interest rate being offered, thus reducing monthly payment amount or loan term;
• better service and products;
• end of fixed rate period;
• end of honeymoon rate period;
• to switch loan from a variable to fixed interest rate;
• to renovate;
• Buy an investment property;
• debt consolidation;
• extend your loan term to reduce monthly payments.

Overall loans should be reviewed regularly and although refinancing is one option, don’t be surprised if staying with your existing lender and negotiating a better loan product and interest rate is the another viable option.

Yes, from time to time lenders will offer incentives to refinance. This may be in the form of a cash bonus . At present a number of the major lenders are offering up to $1,500 cash back to refinance to them. This incentive needs to be factored into the overall assessment of whether a refinance is the best option for you.

Using equity in your home is often the easiest way to have the ten percent deposit ready for the auction or sale.

We will arrange the release of this equity for you, and you will generally not be charged any interest until you actually buy the investment property. We will make this process easy for you .