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The interest rate is based on the interest rate of the Reserve Bank and varies with the market index which means that the repayments will be higher if the interest rates shoot up and the repayments will be lower if the interest rates drop down. The loan term is usually 20 to 25 years.
A standard variable loan is extremely flexible and offers options for mortgage offset (to reduce interest costs), along with other features like redraw facility (to access any additional money deposited as a repayment), ‘split’ option (wherein one can keep intact the interest rate on a part of the entire loan amount by selecting a fixed interest rate and yet continue to enjoy the various features and flexibility options on the remaining part of the loan amount which has a variable interest rate), no-deposit options and also flexibility with repayments (wherein any number of extra repayments can be made at any time without incurring a penalty).
In order to draw more borrowers, this loan also offers an introductory discount in the interest rates for the first one year of the loan term, after which it again reverts to the standard variable rate for the rest of the loan term. Repayments can be made on a weekly, fortnightly or monthly basis.
The downside of a Standard Variable Loan Program is that although it is packed with numerous benefits and flexible features, it has a slightly higher interest rate than a basic home loan.
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