- Posted 16 Nov
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If you’re looking to take out a new home loan or refinance your home loan in the next few months, you might be best to look at fixed interest rate home loans only. This is because with recent interest rate hikes, you’ll be able to protect yourself from any further ‘surprises’ by the major lenders.
This thinking would be in line with a recent survey conducted by the Mortgage and Finance Association of Australia (MFAA) and BankWest, which found that nearly half of would-be borrowers say they that would opt for a fixed interest rate over a flexible interest rate.
What is a Fixed Rate Home Loan?
In laymen terms, a fixed rate home loan is where the interest rate charged on your home loan remains the same for the period of that loan.
Typically, a fixed rate home loan will be fixed from one to five years, although some lenders will extend this out to seven and 10 years. These longer terms are not common in Australia, but are attainable if you meet the criteria laid out by the lender.
With a fixed rate home loan, you’ll find that they are low on features; they are a no-fuss, easy-to-set-up home loan. The focus is primarily on the best interest rate.
What is a Variable or Flexible Rate Home Loan?
On completely opposite sides of the coin, a variable home loan rate is where the interest rate is not fixed, instead it is based on your lenders floating rate. This rate can go up and down frequently, making your repayments changeable.
There are positive’s and negative’s for each home loan rate, so it really does come down to what your personal situation is and what you can afford.
If you’re more risk averse and need to keep your monthly repayments the same, then a fixed rate home loan is your best option. It won’t provide you with a lot of flexibility, but it will provide you with peace of mind, knowing that for a certain period of time, your home loan is secure and your outgoings will remain the same.
If you need help deciding on what the right type of home loan is for you, and whether a combination of a fixed and variable rate home loan would benefit your situation, get in touch with our team today.
We’ll run through the options with you and provide you with all the information you need to make an informed decision. We’ll also find the best lender to suit your needs.
Call us today on 1300 737 868 to get started.