What Makes Variable Rate Loans Different?
When you're buying your first home in Trigg, one of the biggest decisions you'll face is choosing between a fixed interest rate and a variable interest rate. While fixed rates stay the same for a set period, variable rates move up and down with the market. This flexibility comes with both advantages and considerations that every first home buyer should understand before submitting their first home loan application.
Variable interest rates typically follow movements in the Reserve Bank's cash rate, though your lender can adjust rates independently. This means your repayments can change over time, which requires some flexibility in your first home buyer budget.
Why First Home Buyers Choose Variable Rates
Many first home buyers in Trigg opt for variable interest rates because they often come with features that fixed rates don't offer. Let's look at what makes them appealing:
Offset Account Access
A variable rate loan usually allows you to attach an offset account to your mortgage. This is a transaction account where your savings sit and offset the balance of your home loan. If you have $20,000 in your offset account and a $400,000 loan, you'll only pay interest on $380,000. This can save you thousands in interest over the life of your first home loan.
Redraw Facilities
Most variable rate loans include redraw facilities, letting you access any extra repayments you've made. This provides a financial safety net if unexpected expenses arise after you've settled into your new home.
No Break Costs
Unlike fixed interest rate loans, you won't face costly break fees if you want to refinance, make large extra repayments, or sell your property. This flexibility is particularly valuable for first home buyers whose circumstances might change.
Understanding Your First Home Buyer Eligibility
Before diving into loan features, it's important to understand your first home buyer eligibility. As a first home buyer, you may qualify for several government schemes that can reduce your upfront costs:
- First Home Loan Deposit Scheme: Allows eligible buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance (LMI)
- Regional First Home Buyer Guarantee: Similar benefits for properties in regional areas
- First home owner grants (FHOG): Cash grants available for new builds
- First home buyer stamp duty concessions: Significant savings on transfer duty
Your mortgage broker in Trigg, WA can help you determine which schemes you qualify for and how they work with variable rate loans.
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Book a chat with a Finance Broker at Shoreside Finance today.
Low Deposit Options with Variable Rates
One concern many first home buyers have is saving a large deposit. The good news is that variable rate loans work perfectly with low deposit options. You can apply for a home loan with:
- 5% deposit through the First Home Loan Deposit Scheme
- 10% deposit with LMI
- Gift deposit from family members (subject to lender approval)
Having a smaller deposit doesn't lock you out of variable rate benefits. In fact, the flexibility of variable rates can be particularly helpful when you're starting your property journey with limited savings.
The First Home Buyer Checklist for Variable Loans
When applying for a variable rate home loan, make sure you've covered these essentials:
- Check your borrowing capacity to understand how much you can borrow
- Review your first home buyer budget including potential rate movements
- Gather documents for your first home loan application (payslips, tax returns, bank statements)
- Research available first home buyer grants and concessions
- Consider getting pre-approval before house hunting
- Understand the features included with your loan (offset account, redraw, etc.)
- Ask about interest rate discounts you might qualify for
Interest Rate Discounts and Features
When you apply for a home loan, don't assume the advertised rate is what you'll pay. Many lenders offer interest rate discounts based on your deposit size, profession, or if you package other products like home insurance. These discounts can make a meaningful difference to your repayments over time.
Your chosen variable rate loan should also align with how you plan to manage your mortgage. If you're disciplined with savings, an offset account becomes incredibly valuable. If you expect irregular income or bonuses, redraw facilities give you flexibility to get ahead when you can.
Making Extra Repayments Work for You
One of the biggest advantages of variable interest rate loans is the ability to make unlimited extra repayments. Even small additional amounts can shorten your loan term significantly. For example, adding just $100 per fortnight to your repayments on a $500,000 loan could save you over $80,000 in interest and cut years off your mortgage.
The first home super saver scheme also lets you save for your deposit using your superannuation, potentially giving you more funds to put towards your purchase or keep in your offset account.
Getting Your Home Loan Application Right
The home loan application process doesn't need to be overwhelming. Working with a local broker who understands Trigg's property market and the various home loan options available can make the process much smoother.
Your broker will help you:
- Compare home loan options across multiple lenders
- Understand the true cost of different variable rates
- Structure your loan to maximise tax benefits (if applicable)
- Navigate first home buyer eligibility requirements
- Secure pre-approval before you start house hunting
Pre-approval is particularly valuable in Trigg's property market, giving you confidence about your budget and showing sellers you're a serious buyer.
Variable vs Fixed: The Hybrid Approach
You don't have to choose entirely between variable and fixed interest rates. Many first home buyers in Trigg opt for a split loan, where part of their mortgage has a fixed interest rate and part remains variable. This approach gives you some certainty around repayments while maintaining access to variable rate features like offset accounts on the variable portion.
At Shoreside Finance, we help first home buyers across Trigg understand their options and structure loans that suit their circumstances. Whether you're ready to submit your home loan application or just starting to explore what's possible, we're here to help.
Call one of our team or book an appointment at a time that works for you to discuss your first home purchase and find the right variable rate loan for your situation.