Citibank Basic Variable Loan Review

Darren Pearce
Jul 14, 2016( 8 min read )

The basics

The Citibank Basic Variable Loan gives you the simplicity of a low variable interest rate together with the benefit of no ongoing fees to help you pay off your loan sooner.

The Basic Variable Loan is available to owner-occupiers, first home buyers, refinancers and investors and will suit customers who prioritise a competitive interest rate and are willing to sacrifice some flexibility and features to get on with the task of quickly paying down their mortgage.

If you hope to enter the property market with a low interest rate loan to take full advantage of lower repayments, the Citibank Basic Variable Loan provides handy features such as repayment flexibility and a redraw facility to access any funds made through early repayments.

There are no annual fees or monthly account keeping fees, however, upfront fees do apply to this loan. If you plan on making changes to the Basic Variable Loan, it is advisable to check on the fees that may be applicable to weigh-up the costs and benefits. Citibank charges application, settlement and discharge fees which are generally unavoidable and broadly in line with other lenders. As always, it is good practice to check for the latest deals and negotiate your best outcome based on competitive alternatives.

In what is now a standard feature of many loans, Citibank offers its most competitive interest rate subject to your circumstances and the amount you wish to borrow. The lowest rates are available for loans on owner-occupied properties – which is your primary place of residence – when you have a deposit of 20 per cent of the value of the property, so it’s worthwhile negotiating with the bank to get the best rate possible.

The highlights

Owner-occupiers and investors will appreciate the simplicity of a variable rate loan, beginning with zero annual fees and no account keeping fees. The Citibank Basic Variable loan is a ‘no-frills’” mortgage which may be appropriate for customers who want to avoid the fees that come with fully-featured loan packages and ascribe little value to premium features.

One of the key features of the Citibank Basic Variable Loan are the flexible repayment options. You have the freedom to make extra payments without penalty, which can reduce the term of your loan and, in turn, the amount you’re paying in interest. And if you happen to find yourself with some extra cash or a larger lump sum, you can choose to pay it directly into your mortgage, getting you closer to your goal of being mortgage free.

For customers looking for payment flexibility, the Citibank Basic Variable loan provides you with the option for principal and interest or interest-only payments. By choosing to pay only the interest component of your loan, your repayments will be comparatively lower, allowing you to free up extra cash when the budget is tight. You can also choose to schedule your repayments on a weekly, fortnightly or monthly basis to work in with your income and budget.

If you need to access to the extra money you’ve built up in your loan, the Citibank Basic Variable loan includes a redraw facility. It is easy to access with no penalties with no limit on how many redraw transactions you can make. You can use the secure online portal to complete the transfer between your mortgage balance and your transaction account, but keep in mind that a fee may be charged if you choose to use phone banking when completing a manual redraw.

Citibank has adopted a less traditional banking model – with only a limited number of branches – located mainly in the major city centres of Sydney, Melbourne, Brisbane and Perth. Instead, they have chosen to focus on managing customers through digital channels. Citibank provides Internet and telephone banking access through your desktop, tablet and mobile devices, so you can manage all of your account’s key features through 24/7 banking, as well as within business hours over the phone or at any Citibank branch or Australia Post location.

More specific information on the Citibank Basic Variable Loan is available here.

The lowlights

The Citibank Basic Variable Loan is not designed to suit all customers. Some first-time home buyers may be unable to fund a 20 per cent minimum deposit. And, if the amount borrowed is more than 80 per cent of the valuation of the security property, you will be required to pay Lender’s Mortgage Insurance. If you’re a first-time buyer or an investor with a more modest deposit, it may be worth conducting a RateCity search for loan products and competitive rates. Alternatively, discuss your needs with your existing financial institution and try to negotiate an outcome which more closely matches your personal circumstances.

The benefit of a basic loan is typically lower interest rates; the downsides are the lack of features. One feature you will need to learn to live without is an offset facility. Fee-free 100 per cent offset facilities have become a common feature with more fully featured loan packages. The benefit of the offset facility is that it allows you to save on the amount of interest you must pay and helps reduce your loan term. Citibank Basic Variable Loan customers instead need to focus on maximising their lower variable rate by making regular, additional and lump sum repayments, in order to reduce their loan balances to pay off this loan early.

As a stand-alone offer, the Citibank Basic Variable Loan does not provide a fixed interest option for customers wanting to balance the risks of interest rate movements. Most fully featured loan packages give you the best of both worlds – combining the security of a fixed rate with the flexibility of a variable rate. Citibank provides you with an option to combine the Basic Variable Loan with the Standard Fixed Rate Mortgage, however this modification incurs a fixed loan application fee.

The Citibank Basic Variable Loan is a full-documentation loan, which means you will need to provide comprehensive financial, employment and personal information. This can sometimes prove difficult for some self-employed borrowers or contractors who may not have the proof of income documents usually required to apply for a home loan.

With the wide choice of home loan products available to consumers, it’s important to ensure that you select the one which best suits your own circumstances. Citibank provides a range of home loan alternatives suitable for different priorities such as fixed interest rates, line of credit facilities, offset and premium featured loan packages.

The verdict

The Citibank Basic Variable Loan is a ‘no frills’” mortgage for customers looking to enter the property market with a low interest rate and maximise the opportunity of lower repayments. The Basic Variable Loan will appeal to owner-occupiers and investors who value a low variable rate, prefer a no-fuss banking experience and are prepared to compromise on a range of other premium features.

However, if you prefer to know that your home loan will accommodate your changing needs over time, you may want to consider more fully featured packages. These packages tend to include fee-free 100 per cent offset facilities, linked credit card and savings accounts along with bundling options with other financial and insurance products.
The Citibank Basic Variable Loan gives you payment flexibility together with a competitive interest rate, so if you’re confident you can pay off your home loan quickly, the CITIBANK Basic Variable Loan may be the package that helps you to your goal of being mortgage free sooner.

The bottom line

Choosing a home loan is a huge decision and one that may have implications for two or even three decades, so it is important you take the time to do your due diligence to determine if this loan is a good fit.

Given the wide range of loans available with different interest rates, product features and fees, it pays to shop around to find the loan that fits your needs and circumstances.

The terms and conditions associated with financial products can be confusing, so if you don’t fully understand the commitment you’re about to enter into, it may be worth seeking professional advice to ensure the appropriateness of the product before signing.

Note: This review provides general information about the above home loan. Any views expressed are the author’s own. It is not intended to be a recommendation of a particular product. To the extent that this commentary may constitute general advice, this advice is of a general nature and does not take into account your individual objectives, financial circumstances or needs. We recommend that before you make any financial decision you seek professional advice from a suitably qualified adviser and read the PDS. Read more about our important disclosures here.

About the author

Darren Pearce

Darren Pearce is a personal finance expert and freelance writer.

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