Avoid these Variable Rate Loan and Extra Repayment Mistakes

Understanding Variable Home Loan Rates

When you're buying a home in St Kilda, choosing between a variable interest rate and fixed interest rate home loan can feel overwhelming. Variable home loan rates move up and down with market conditions, which means your repayments can change throughout your loan term.

Unlike a fixed interest rate home loan where your rate stays the same for a set period, variable rates offer flexibility that many homeowners find valuable. Here's what you need to know:

• Your home loan interest rate can decrease when market conditions improve
• You typically have access to features like offset accounts and redraw facilities
• Most lenders offer interest rate discounts on variable products
• You can make extra repayments without penalties

The Power of Extra Repayments

Making additional payments towards your loan amount can dramatically reduce the total interest you pay over the life of your home loan. Even small extra amounts can make a significant difference to your financial situation.

For example, if you have a $500,000 home loan with a variable interest rate of 6% over 30 years, paying an extra $200 per month could save you over $80,000 in interest and reduce your loan term by approximately 6 years.

How Extra Repayments Work with Variable Rates

Variable rate loans are particularly suited to extra repayments because they typically don't have the restrictions you might find with some fixed products. When calculating home loan repayments, consider these strategies:

1. Round up your repayments - Instead of paying $2,847 monthly, round it up to $3,000
2. Use your tax refund - Apply lump sums directly to your principal
3. Set up an offset account - Your everyday banking can reduce interest charged
4. Make fortnightly payments - You'll make 26 payments per year instead of 12 monthly ones

Getting Pre-Approved for Variable Rate Loans

When you're ready to apply for a home loan, getting pre-approved gives you confidence when making offers on St Kilda properties. The Home Loan pre-approval process involves assessing your borrowing capacity based on your income, expenses, and financial commitments.

During the application process, lenders will review:
• Your banks statements from recent months
• Employment verification and income details
• Your loan to value ratio (LVR)
• Whether you'll need lenders mortgage insurance (LMI)

Accessing Home Loan Options Across Australia

As St Kilda residents, you can access Home Loan options from banks and lenders across Australia, not just local institutions. This broader access means more competitive pricing and features that suit your specific needs.

The streamlined application process means your mortgage broker in St Kilda can compare multiple lenders simultaneously, helping you find suitable Home Loan Rates without the hassle of multiple applications.

Property Market Considerations for St Kilda

The local property market influences your home loan strategy. St Kilda's diverse housing options, from modern apartments to heritage homes, each come with different lending considerations.

Factors affecting your Home Loan application include:
• Stamp duty calculations for your property price range
• Building inspections for older properties
• Strata reports for apartment purchases
• Your home equity if you're upgrading

Making Smart Repayment Decisions

Variable interest rates give you flexibility to take advantage of changing market conditions. When rates are lower, you might choose to maintain higher repayments to pay down your principal faster. When your financial situation tightens, you can reduce payments to the minimum required amount.

Consider setting up automatic extra repayments when you receive salary increases or bonuses. This approach helps you build home equity faster without feeling the impact on your regular budget.

Remember that applying for a home loan is just the beginning. Regular reviews of your loan structure, interest rate, and repayment strategy ensure you're making the most of your investment.

Whether you're a first-time buyer or looking to refinance your existing loan, understanding variable rates and extra repayments puts you in control of your financial future. The key is finding the right balance between loan features, interest rates, and your personal financial goals.

Call one of our team or book an appointment at a time that works for you to discuss your variable rate home loan options and create a repayment strategy that works for your St Kilda lifestyle.