Interest Rates
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Interest rates can be fixed, variable, or both. Based on your circumstances, current needs, and potential future changes such as changes in the Reserve Bank of Australia’s (RBA) cash rate or your personal financial situation, we recommend the type that would benefit you the most.
Types of Interest Rates
Variable Interest Rate
The variable interest rate means the interest rate on your loan can fluctuate over time, going up or down. It comes with annual fees and offers an offset account; some banks may provide multiple offset accounts. There is also a basic variable interest rate, which comes with a redraw facility without any annual fees.
Fixed Interest Rate
A fixed interest rate means your loan interest rate can be fixed for 1 to 5 years. This means your interest rate will not change until the fixed term, even though the RBA or banks may increase their interest rates.
Principal and Interest on Home Loans
Generally, interest and principal are included in repayments on owner-occupied home loans. You should pay interest and principal on your principal residence place, although VOXFIN’s best home loan mortgage broker in Australia will guide you to crystalise your decisions.
Understanding how the various types of loan repayments work and how they might change over time is essential before deciding on a repayment plan.
- By making principal payments, you will lower your principal balance and reduce the interest accrued over the life of the loan.
- Your overall interest payments may decrease as your principal balance diminishes with each repayment.
- Ensure you review current interest rates on loan products before applying for or accepting a loan, as interest rates are subject to change.
Interest Only
‘Interest only’ is an effective strategy for investment property home loans. We will help structure your residential and commercial investment home loans based on your overall needs and objectives.
When you have an interest-only home loan, your payments only go toward the interest on the loan amount, not the principal. This means you won’t reduce the amount you borrowed for a specific timeframe, such as five years. After this period, the loan will switch to a ‘principal and interest’ loan, where you’ll start paying back the borrowed amount along with interest, resulting in higher monthly payments.
As a First Home buyer, you are choosing VOXFIN for:
- Savings on stamp duty
- Simplified home loan process
- Maximise your borrowing power
- Lowest interest rates in Australia
- Give you a complete understanding of the costs involved
- Personalised loan structure to meet your needs and lifestyle
- The best mortgage & home loan broker in Australia will guide you
- Get your preapproval guaranteed so you can buy with confidence
- Access to First Home Guarantee Scheme (FHGS) and Government Grants
Frequently Asked Questions (FAQ)
Questions and queries related to Interest Rates
DOES AN OFFSET REDUCE MONTHLY REPAYMENTS?
Principal & Interest:
Your offset balance does not affect your minimum monthly principal and interest (P&I) repayments. Instead, all the funds in your offset account work to reduce the amount of interest you pay on your home loan. You only pay interest on the difference between the loan amount and the amount in your offset account. If you maintain or increase your offset balance, your interest payments may be lower, meaning you could pay off your home loan sooner.
CAN YOU HAVE AN OFFSET ACCOUNT WITH A FIXED RATE?
Generally, No. Most banks do not offer this option. However, some banks do offer an offset account at a fixed rate. Alternatively, you can split your home loan so the variable part has an offset account attached. It may have an annual fee.
WHAT'S THE DIFFERENCE BETWEEN AN OFFSET ACCOUNT AND A REDRAW ACCOUNT?
When choosing between a redraw facility and an offset account for your home loan, it’s important to understand the differences and how they work.
Redraw: With a redraw facility, you can make extra repayments in addition to your minimum fortnightly or monthly home loan repayment. These additional funds can be taken out if you need them for expenses like renovating your home. The extra funds sit in your home loan account and reduce the amount of interest you pay. Keep in mind that the extra funds will reduce with regular repayments over time.
Offset: An offset account is a separate transaction account linked to your home loan. You can use it as your everyday bank account with easy access to your funds. Any money you have in your offset account reduces the balance of your home loan, meaning you only pay interest on your home loan balance minus the balance of your offset account. The more money you keep in your offset, the less interest you pay. However, the amount it can reduce the interest on your home loan rises and falls with your offset account balance.
Redraw facilities are available with most variable interest rates, while offset accounts are only available with package products that come with annual fees.
Both options or a combination of the two, can save you money on interest and help you pay off your home loan faster. The best choice for you depends on your personal circumstances, how you manage your money, and your current financial situation, as well as any extra interest or fees you may need to pay for using either one.
DOES AN OFFSET ACCOUNT WORK LIKE A SAVINGS ACCOUNT?
An offset account is an everyday transaction account. The funds in an offset account do not earn interest, but they will offset the interest on your home loan balance by the same amount. Since home loan interest rates are usually higher than savings account interest rates, funds kept in an offset account are still beneficial to you.
For example, let’s say you earn 2% per annum on funds in a savings account, but the interest rate you are paying on your home loan is 6.00% per annum. You would save that 6.00% per annum in interest charges on the same funds if you kept them in an offset account linked to a home loan.
WHAT ARE THE RISKS WITH AN OFFSET ACCOUNT?
No risk, offset account comes with either an annual fees or monthly fees.
Offset accounts are most effective when the balance grows. Frequent withdrawals reduce its effectiveness. The longer funds stay in the account, the more they can reduce interest payments on your home loan.
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DO MORTGAGE REPAYMENTS COME OUT OF THE OFFSET ACCOUNT?
The minimum monthly repayments will always be deducted from your nominated transaction account, whether it’s your offset or another account.
You have the flexibility to make regular or one-off extra repayments from any transaction account. If you miss your minimum monthly repayment and have enough available funds (extra repayments) in your loan’s redraw facility, we will automatically use the redraw funds to meet your minimum monthly repayments.
WHAT IS A SPLIT LOAN?
A split home loan involves dividing your home loan balance into two separate accounts: one with a fixed interest rate and one with a variable interest rate.
By splitting your loan balance, you can benefit from both types of interest rates. The fixed rate portion provides stability, as your interest rate and loan repayments remain constant for the duration of the fixed rate term. On the other hand, the variable rate portion allows you to take advantage of potential decreases in interest rates and make unlimited extra repayments.
YOU WILL BE NOTIFIED WHEN YOUR VARIABLE INTEREST RATE OR REPAYMENT IS CHANGING.
Your Lender will notify you of any changes in the variable interest rate, including the new interest rate, your updated minimum monthly repayment amount, and the effective date of the change. If your next scheduled repayment falls after this date, it must reflect the new repayment amount.
WILL MY FIXED-RATE PLAN BE AFFECTED BY CHANGES IN VARIABLE RATES?
No, you will not be affected by interest rate changes while you are in your fixed-rate loan term. However, once your fixed-rate loan term ends, your home loan rate will change to the current variable rate.
WHAT HAPPENS IF THE INTEREST RATES CHANGE WHILE I'M IN THE MIDDLE OF APPLYING FOR A HOME LOAN?
If you have locked your interest in the application form, then you might be save. However, the rate change could affect you.
Our expert mortgage brokers at VOXFIN will guide you each step of the way to eliminate such a situation.
WHAT'S THE DIFFERENCE BETWEEN AN OFFSET ACCOUNT AND A HOME LOAN?
An offset account is an everyday bank account, while a home loan is a type of mortgage product. The offset account is connected to the home loan, and the money kept in it helps to reduce the balance of the loan. As a result, interest is charged based on this reduced balance rather than the total outstanding home loan balance.
Why choose us?
We understand the importance of earning your trust in the guidance provided by the mortgage experts at VOXFIN. We can assist you with all types of home loans as well as all other financial lending needs, such as refinancing home loans, car loans, commercial loans, and insurance.
Additionally, we can assist with organising financing to start or grow your business and fund your assets. Our services for finding the right home loan are free of charge to you. Once your loan is settled, the lender compensates us.
VOXFIN’s expert home loan mortgage brokers are here to assist you with all types of financial needs. We simplify the loan process and provide the right information and guidance so you can make sound investment decisions.
We assist Australians throughout the nation. We work with over 35 lenders in Australia to bring you the best loan option with the lowest interest rate and the most appropriate home loan structure to grow your property portfolio.
Australians have trusted us as expert home loan mortgage brokers for all types of their loans and mortgage needs such as first home buyer loans, refinancing home loans, agribusiness loans, business loan brokers, commercial loan brokers, car loan brokers, asset and equipment finance brokers, SMSF property loans, property development finance brokers, business car loan brokers, bad credit score lenders, medical professionals’ loans, personal loan brokers, and many more to help them find the suitable loans to finance their property dreams.
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info@voxfin.com.au
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At VOXFIN, we are committed to being with you at every step in your home loan process. We keep your best interests ahead of everything by providing comprehensive solutions powered by our solid industry expertise and deep financial knowledge. This ensures you can make an informed decision with confidence, knowing that you have our full support.
Our streamlined home loan borrowing process is designed to alleviate the stress of navigating the complexities of finding the best home loan solution. We’re here to secure the lowest interest rates on your owner-occupied home loan or investment property loan, making the process as smooth and convenient as possible for you.
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