Basic variable loans generally have a lower interest rate and fewer loan features than a standard variable loan. Over the years, basic variables have increased in flexibility with many accepting extra payments and allowing redraw which is the ability to take out any extra money that you have put in,

Features and flexibility vary wildly with basic variable mortgages with some prohibiting extra payments, whilst others include a 100% offset account. Very few have sufficient features that will allow you to minimise interest costs for that loan without quite a bit of hard work with manual transfers often being required for redraw and extra payments.

Pros:
  • Minimum repayments fall when lenders lower interest rates
  • You can usually pay off the mortgage quickly by not having any penalty for advance payouts
  • Usually have a lower interest rates
Cons:
  • Repayments rise when lenders increase their mortgage interest rates
  • Wide variation in flexibility and cost to deploy features makes comparison quite difficult without the right tools and experience.
  • Rapid rate hikes can catch you off guard and place you under financial pressure
  • Flexibility features often carry limitations and fees which really add up (like ATM or EFTPoS fees on redraws)

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