What Is the Advantage of a Variable Interest Loan?
Some Australians remember that variable rate loans caused economic problems. Thus they began staying away from them. The variable interest rate loan has one great risk – uncertainty. However, it also has several benefits.
Mortgage House covers the benefits in some detail here.
A fixed-rate mortgage is a contract between the homebuyer and the lender. It’s also a contract between the lender and a wholesaler. The homeowner incurs break fees if they deviate from the contract because it forces the lender to break theirs with the wholesaler.
For a variable rate loan, this isn’t an issue. The contract between the lender and homebuyer allows the homebuyer to send additional repayments. It’s possible to pay it off early. It’s also in the best interest of the homebuyer to pay it off sooner.
The variable rate loan allows for refinancing while the fixed-rate loan does not. If rates drop, the homeowner can refinance to obtain a better rate. In addition, they can change lenders with this action.
Since a variable rate loan holder can refinance, they stand to benefit from the savings. Plus they have the opportunity to chip away at the principal. The sooner they pay off the bulk of the principal, the less the homeowner pays in interest rate charges.
Variable Interest Rate Loan Conclusion
Individuals interested in obtaining a variable interest rate loan can contact our Mortgage House loan specialists. The specialists can answer your questions about home loan rates and provide additional information for your financial goals. Contact us today.