Melbourne, VIC
Fixed or Variable Rates
Fixed or Variable Rates
Is this a good time to fix rates, with all the fuss about rate rises? Unfortunately, there is no one size fits all approach, when it comes to interest rates. It depends on what your longer-term outlook, goals and objectives are. There are a few differences between fixed and variable rates which I will try to address below.
Fixed Rate Home Loans
This loan structure will give you certainty of repayments for the term of the fixed period. The term typically ranges from 1-5 years. In the fixed term period, the ability to make extra repayments towards your home loan may be limited. Some banks may allow an extra repayment of up to $10,000 per year. You will need to speak to your mortgage broker to determine which banks offer that facility. If you break the fixed rate loan in this period, for eg. You want to refinance or top up your home loan, the bank may charge you break costs. These costs may be prohibitive and may limit your options for any variations to your loan. Typically, with most fixed rate loan products there may not be an offset facility available. Again, if you plan to pay down your loan faster, this may not be suitable for such purposes.
So, to wrap up a fixed rate home loan product may give you certainty of repayments for the fixed rate period but may come with other limitations. Speak to your Mortgage Broker in detail and understand the conditions of the loan before making a decision to jump into it.
Variable Rates Home Loans
A variable home loan, is where the interest rate is variable. The rate may change due to numerous factors during the life of the loan such as RBA rate rises etc. This product though, may offer other features such as extra repayments towards your home loan, an offset facility or a redraw facility. If you want to lower interest repayments, by making extra repayments into your home loan, then this product may offer you the facility to do so. Variable products are generally more flexible and will offer the options to top up or refinance without incurring break costs. Of course, there may be other costs associated which you have to check with your Mortgage Broker before making an informed decision.
What type of loan product suits you will depend on your individual circumstances, needs and objectives. You should have a thorough conversation with your Mortgage Broker before making any decision.
For any questions, please feel free to contact
John Kalla-04109476
Disclaimer: This is not personal financial advice. I have not considered your financial needs, goals or objectives.
