How variable rate home loans work

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A guide to variable rate home loans

Updated March 19, 2024
Written by James Hurwood
Reviewed by Stephen Zeller

What is a variable rate home loan?

How do variable rate home loans work? Selling Houses Australia host, Andrew Winter, has the answers.
Andrew Winter
Home Loans

Farewell paperwork, it's Home Loan Heaven


Why choose a variable rate home loan?

  • They typically allow for unlimited additional repayments towards your home loan
  • Their variable nature means you stand to benefit from an interest rate decrease
  • Variable rate home loans typically come with more optional extra features, such as offset accounts

What to know when comparing variable rate home loans

The main things to keep in mind when comparing variable rate home loans include:

  • The comparison rate, which represents the total cost of the loan (including interest and upfront/ongoing fees), giving you an easy way to compare different home loans. If you’d like to learn more, you can read our guide to comparison rates.
  • Feature offerings, meaning the range of features on offer for each home loan. While most variable rate home loans won’t differ too much in the range of features they offer, it’s still important to check any product you’re looking at offers the features you want in a home loan.
  • Repayment flexibility, which boils down to two main questions: Can you choose your repayment frequency (weekly, fortnightly or monthly) and can you make fee-free additional repayments?

Expert tips for variable rate home loans

It’s important to understand the differences between different home loan types, and how they each might work for or against you. To help you with this, our General Manager of Money, Stephen Zeller has some tips:

Stephen Zeller
General Manager – Money

Keep an eye out for cashback offers

Some lenders may offer cashback incentives for customers refinancing their loan, so when comparing variable rate options from various lenders, you may want to enquire about what cashback offers are available as well. Sometimes, you may find that paying a slightly higher interest rate with a different lender may be more beneficial to you if you receive $2,000-$4,000 back in your account after settlement.

Review your rate regularly

You may find your variable rate isn’t as competitive as the years go by, and unfortunately some financial institutions don’t show as much loyalty to you as you give to them. It’s important to review your variable rate regularly; look to compare it with other options available in the market and ask yourself whether it’s worth exploring other lenders’ loan options.

Variable rate loans can make future sales cheaper

It’s not uncommon to be unsure about whether to get a variable rate, fixed rate or split home loan. If you’re thinking of selling your home in the future, a variable rate home loan could be an option worth considering, as there usually won’t be any break fees involved if you do sell your home.

Variable rate home loans explained

What is a variable rate home loan?

How interest is charged on variable rate home loans

Are there different types of variable rate home loans?

Variable rate home loans vs fixed rate home loans

What’s the difference between fixed and variable rate home loans, and which is better for me?

Can I switch from a fixed home loan to a variable rate home loan?

Important to know

How often do variable interest rates change?

What features are available on variable rate home loans?

Meet our home loans expert, Stephen Zeller

Stephen Zeller
General Manager – Money

Stephen has more than 30 years of experience in the financial services industry and holds a Certificate IV in Finance and Mortgage Broking. He’s also a member of both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the Mortgage and Finance Association of Australia (MFAA).

Stephen leads our team of Home Loan Specialists, and reviews and contributes to Compare the Market’s banking-relating content to ensure it’s as helpful and empowering as possible for our readers.