Fixed Vs Variable Home Loans
Australian Best Home Loans : cheap home loans, best home loans, home loans

Looking for a Best Home Loan ?
we can get one for you...

Application Process Compare Home Loans ASIC Mortgage Calculator

Fixed Vs Variable Home Loans
 

Home loans generally have either a fixed or variable interest rate, or a split rate - a mixture of both. A fixed rate home loan is taken out for a set number of years with a set interest rate; when this period ends you can fix the rate again, or switch to a variable interest rate which fluctuates with the market.

Variable Home Loans allow the interest rate to move during the loan term with rate movements by the RBA as well as independent rate movements from your lender.
 

Fixed rate home loans
Fixed rate home loans have traditionally been associated with inflexible conditions, but with flexible new products available, fixed rate loans are currently quite popular in Australia (though not as popular as standard variable rate loans). Many of today’s fixed-rate home loans allow for extra repayments and include redraw facilities.

A fixed rate home loan can be good if you want to protect yourself from future rate hikes. These loans leave you knowing exactly how much you need to repay means you can plan accordingly and give you a degree of certainty and security.

However, some fixed rate loans still charge you for making early repayments, which means that if your financial situation becomes stronger or you chose to sell your home during the fixed rate period you may incur a penalty.

If choosing a fixed rate loan, you also need to consider fairly carefully the term of the loan – usually between one and five years, but sometimes up to ten. The most popular fixed-rate loan term is three years - which seems to allow borrowers a sense of security with a certain degree of flexibility, but the choice of loan term needs to suit your specific situation.
 

Variable rate home loans
Variable rate home loans usually provide options and flexibility, but they can also be risky in a rising interest rate market as they can make your loan unaffordable. The important thing to do when taking out a variable rate loan is to plan and budget for rate increases, and make sure that you’re able to meet your repayment obligations should rates rise.

Variable rate loans can include a range of extra loan features, and some loan products have low introductory, or “honeymoon” rates for an initial period before reverting to the standard rate.

The choice that you make does depend on where you believe rates are expected to move in the near future. If you believe that rates are going up and will be staying high for a while – then it is best to fix. Alternatively if you feel that rates may go up and down then it is safer to stay with a variable product.