Variable rate home loans are subject to interest rate movements. Therefore, they can generally increase or decrease in line with the Reserve Bank of Australia's cash rate..

There are many type of variable rate loans and they can be classified as follows;

• Basic Variable Rate Loans.

• Standard Variable Rate Loans often linked to a professional package to get interest rate discounts.

• Line of Credit or Home Equity Loans.

What to look for

• Low interest rate, upfront and ongoing fees.

• The ability to make extra and lump sum repayments.

• 100% offset accounts or free redraw facility attached to the loan account.

• Solid lender that will offer competitive ongoing rates.

• Professional packages may provide added value if it suits your lending needs.

Advantages

• Ability to make extra repayments with out penalty for most loans.

• Offset accounts and redraw are a common feature.

• Discounts available for most variable loans.

Disadvantages

• Interest rate fluctuations.

• Not all variable loans are the same as they have different fees and features.