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:: Variable interest rate loan ::
The most common home loan is the standard variable interest rate loan. The variable interest rate on this loan goes up and down with the movement in general interest rates within the economy. This means the borrowers monthly loan repayments will vary up and down. Fortunately within the Australian economy over the last 5 years interest rates have been stable, only varying within 1 degree. The outlook over the next few years is also of stability, however if a rise in the interest rate and hence monthly repayment would cause undue hardship the borrower may look at fixing some or all of the home loan. This loan is also known as a basic variable or standard variable loan.
It is possible to combine or "split" the part of the loan amount between floating and fixed. It is quite common to have half the loan on a floating variable interest rate and the other half on a fixed interest rate. This offers certainty with part of the payments and flexibility to make early repayments etc with a floating rate.
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