Everything You Need to Know About Variable Rates & Offsets

Understanding Variable Rate Loans for First Home Buyers

As a registered nurse taking your first steps toward buying your first home, understanding your home loan options is crucial for making informed financial decisions. Variable rate loans remain one of the most popular choices for first home buyers, offering flexibility that suits many nursing professionals as they begin their property ownership journey.

A variable interest rate loan means your interest rate can move up or down throughout your loan term, typically in response to changes in the official cash rate set by the Reserve Bank of Australia. When rates decrease, you'll pay less in interest on your mortgage. Conversely, when rates increase, your repayments will rise accordingly.

Why Variable Rates Appeal to First Home Buyers

Variable rate loans offer several advantages that make them particularly suitable for registered nurses entering the property market:

• Flexibility with repayments: You can often make additional repayments without penalty, helping you pay off your first home loan faster
• Access to loan features: Most variable loans include useful features like offset accounts and redraw facilities
• No break costs: Unlike fixed interest rate loans, you can refinance or pay off your loan early without facing significant penalties
• Potential for rate decreases: If the interest rate falls, your repayments automatically reduce

For nurses working shift patterns or considering overtime opportunities, the flexibility to make extra repayments when finances allow can be particularly valuable.

How Offset Accounts Work

An offset account is a transaction account linked to your home loan that can significantly reduce the interest you pay. The balance in your offset account is "offset" against your home loan balance before interest is calculated.

Here's a practical example: If you have a $500,000 home loan and $20,000 in your offset account, you'll only pay interest on $480,000. This can save you thousands of dollars over your loan term whilst keeping your money accessible for emergencies or planned expenses.

The Benefits of Offset Accounts for Nurses

For registered nurses, offset accounts offer distinct advantages:

1. Maintain emergency funds: Healthcare professionals often need quick access to funds for various reasons, and offset accounts keep your money accessible
2. Manage irregular income: If you receive shift allowances, overtime, or agency payments, you can park these funds in your offset to reduce interest whilst keeping them available
3. Save for goals: Whether planning a holiday or saving for furniture, your money works double duty by reducing loan interest whilst remaining accessible
4. Tax efficiency: Unlike savings account interest, the benefit you receive from an offset account isn't considered taxable income

Offset Accounts vs Redraw Facilities

Many first home buyers confuse offset accounts with redraw facilities, but they function differently:

Offset accounts keep your savings separate from your loan in a linked transaction account. You can access your funds instantly using a debit card or internet banking, just like a regular transaction account.

Redraw facilities allow you to access extra repayments you've made on your loan. However, accessing these funds may involve processing times, minimum withdrawal amounts, or fees. Some lenders can also restrict redraw access under certain circumstances.

For nurses who value flexibility and immediate access to funds, offset accounts typically provide greater control over your money.

Considerations When Choosing a Variable Rate Loan

When completing your first home loan application, consider these factors:

• Interest rate discounts: Many lenders offer rate discounts for healthcare professionals, which can significantly reduce your borrowing costs
• Loan features: Ensure the loan includes the features you need, such as a 100% offset account
• Account fees: Compare monthly account fees against potential savings from the offset feature
• Minimum deposit requirements: Explore options like the 5% deposit scheme specifically available for nurses

Making Variable Rates Work for Your First Home Budget

Creating a first home buyer budget that accounts for potential interest rate movements is essential. Consider these strategies:

• Set your budget based on an interest rate 2% higher than current rates to ensure you can manage repayments if rates increase
• Direct your salary into your offset account and pay expenses throughout the month to maximise your offset benefit
• Continue making repayments as if rates were higher when rates are low, building a buffer in your offset account
• Review your home loan options regularly to ensure you're receiving competitive rates

First Home Buyer Eligibility and Support

As a registered nurse purchasing your first property, you may be eligible for various government schemes and concessions:

• First home buyer stamp duty concessions: Reduce or eliminate stamp duty costs in most Australian states
• First Home Loan Deposit Scheme: Access low deposit options with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI)
• Regional First Home Buyer Guarantee: Additional support for properties in regional areas
• First home owner grants (FHOG): Available in some states for new home purchases
• First Home Super Saver Scheme: Save for your deposit using your superannuation

Nurses often qualify for special lending programs that offer no LMI loans or reduced deposit requirements, making homeownership more accessible.

Getting Started with Your Home Loan Application

When you're ready to apply for a home loan, having your first home buyer checklist prepared will streamline the process:

• Proof of income (payslips, employment contract, group certificate)
• Identification documents
• Bank statements showing your savings pattern
• Details of any gift deposit from family
• Information about your employment history
• Documentation of any existing debts or financial commitments

Obtaining pre-approval before you start property hunting gives you confidence about your borrowing capacity and shows sellers you're a serious buyer.

Maximising Your Offset Account Strategy

To get the most benefit from your offset account:

• Deposit your entire salary into the offset account, then transfer money to other accounts as needed
• Time your large payments (like annual insurance premiums) strategically to keep maximum funds in offset for longer
• If you have multiple loans, check whether your offset applies partially or fully across all loans
• Keep personal spending money in the offset rather than a separate savings account

Even small balances make a difference. Every dollar in your offset account reduces the interest charged on your home loan.

Variable rate loans combined with offset accounts provide registered nurses with flexibility and control over their first home loan. Understanding how these features work together allows you to structure your finances to reduce interest costs whilst maintaining access to your funds.

Call one of our team or book an appointment at a time that works for you to discuss how variable rate loans and offset accounts can work for your circumstances as a registered nurse buying your first home.