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What is a discount variable rate?

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When looking to purchase your first property, one of the most important factors to consider will be what kind of home loan you decide to choose. Educating yourself on the different kinds of available home loans and their features will help to make the decision-making process a lot easier.

In Australia, there are two main types of home loans available, fixed and variable rate loans, the third is known as a split rate which is a combination of the two.

A variable rate home loan is a loan with an interest rate that may change over time. If choosing a variable rate home loan, you may be able to take advantage of any interest rate decreases over the period of your loan. If your rate decreases, you’ll pay less interest on the home loan balance. Similarly, if your rate increases, you will be paying a higher interest rate and regular payment amount than at the beginning of your loan term.

Some home loans may include a discount variable rate, a special or introductory offer that will include a discounted rate for a period of time. This is typically for one to two years, after which time the rate will revert to the standard variable rate which will be higher.

A fixed interest rate does not change over the fixed rate term of the loan, between 1-5 years. This loan type allows you to lock in some certainty about your rate and ensure how much your repayments will be over the fixed rate term. As the rate is fixed, you won’t be able to take advantage of any potential decreases in your home loan interest rate, but you also won’t have to worry about any increases.

If you’re in the market for a home loan, check out our home loan calculator to estimate what your monthly mortgage repayments could be.

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About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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