Standard Variable Loan

This type of home loan is one of the most common and popular among home loans in Australia. It has standard variable interest rate, which is dependent on the movement of the official cash rate set by Reserve Bank of Australia. The standard variable loan is often flexible, allowing options like having extra repayments and access to redraw facilities. You may also enjoy lower repayments in a falling interest rate environment. The downside, however is, repayments also go up when interest rates rise.

Pros

  • Flexible, with added features
  • Repayments can go down as interest rates fall
  • Most lenders allow extra repayments
  • Access to ‘redraw’

Cons

  • Repayments go up when interest rates rise
  • Due to additional features, interest rates are slightly higher

Basic Variable Loan

The basic variable loan is a simpler version of standard variable loan that comes with less features and flexibility. Although you can still access additional features, generally you have to pay for whatever you want to add to your home loan package. The good news is, in exchange for less features, basic variable loan typically offers lower interest rates than standard variable loan.

Pros

  • Lower interest rates
  • Lower repayments

Cons

  • Lesser features
  • Lesser flexibility