Top 5 Variable Rate Loan Features for First Home Buyers

Understanding Variable Interest Rates for First Home Buyers

As a Service NSW employee looking to buy your first home, understanding variable interest rate loans is crucial for making informed decisions. Variable rates fluctuate with market conditions, which means your repayments can change over the loan term. While this might sound concerning, variable rate loans offer unique features that can work in your favour.

Variable interest rates typically start lower than fixed interest rates, potentially saving you money in the early years of your loan. When the Reserve Bank of Australia cuts rates, you'll benefit from reduced repayments without needing to refinance.

Key Variable Rate Loan Features

1. Offset Account Benefits

One of the most valuable features available with variable rate loans is the offset account. This linked savings account reduces the loan amount on which you pay interest. For example, if you have a $400,000 loan amount and $20,000 in your offset account, you'll only pay interest on $380,000.

Offset accounts are particularly beneficial for Service NSW employees who receive regular salaries, as you can deposit your entire pay and withdraw funds as needed for daily expenses.

2. Redraw Facilities

Most variable rate loans include redraw facilities, allowing you to access additional repayments you've made above the minimum requirement. This feature provides financial flexibility while helping you pay down your loan faster when possible.

The redraw facility can be particularly useful during your first few years of buying a home when unexpected expenses often arise.

3. Interest Rate Discounts and Packages

Lenders often provide interest rate discounts for borrowers who meet certain criteria. As a public service employee, you may qualify for professional packages that include:

• Reduced interest rates
• Waived annual fees
• Discounted lenders mortgage insurance (LMI)
• Fee waivers on other banking products

These packages can result in significant savings over your loan term.

4. Flexible Repayment Options

Variable rate loans typically offer more flexibility in repayment structures. You can often:

• Make additional repayments without penalty
• Switch between principal and interest or interest-only payments
• Adjust payment frequency (weekly, fortnightly, or monthly)
• Take repayment holidays in certain circumstances

This flexibility can help manage your financial situation as your circumstances change.

5. Portability Features

Many variable rate loans include portability, allowing you to transfer your existing loan to a new property without reapplying. This feature can save time and money if you decide to upgrade or relocate within a few years of buying your first home.

First Time Home Buyer Schemes and Variable Rates

As a first home buyer, you can combine variable rate loan features with government assistance programs:

Home Guarantee Scheme: This program allows eligible first home buyers to purchase with deposits as low as 5% while avoiding LMI costs. Variable rate loans are compatible with this scheme.

First Home Owner Grants (FHOG): These state-based grants can be used alongside variable rate loans to reduce your initial financial commitment.

First Time Home Buyer Programs: Various lenders offer specialised programs for first home buyers that include enhanced variable rate features and streamlined application processes.

Considerations for Service NSW Employees

When applying for a home loan, lenders assess your borrowing capacity based on your income stability and financial commitments. As a Service NSW employee, your secure employment can work in your favour during the application process.

Lenders typically require recent bank statements and proof of income to determine your loan to value ratio (LVR) and suitable loan amount. Your stable public service income can help you access Home Loan options from banks and lenders across Australia.

Getting Pre-Approved

Before you start seriously looking at properties, consider getting pre-approved for your first Home Loan. Pre-approval gives you confidence when making offers and helps you understand exactly what you can afford in the current property market.

The application process involves providing documentation about your financial situation, including income verification and bank statements. Many lenders now offer streamlined application processes specifically designed for public service employees.

Investment Loan Options

While focusing on your first home, it's worth understanding that many lenders offer investment loan options with similar variable rate features. This knowledge can be valuable if you later consider purchasing your first investment property.

Variable rate loans offer flexibility and features that can significantly benefit first home buyers, particularly Service NSW employees with stable incomes. From offset accounts to professional packages, these features can save you money and provide financial flexibility throughout your loan term.

Call one of our team or book an appointment at a time that works for you to discuss how variable rate loan features can help you achieve your home ownership goals.