With interest rates at record low levels, many homeowners are considering the possibility of fixing their interest rate on the home loan.
Before going down this path it’s important to ask some key questions and decide whether this is the right option for you.
Why Fix?
When looking at a fixed interest rate, the main reason a homeowner would consider that option is the security of knowing the repayments are set for a period of time.
That might be a good option if you’ve got a home loan that you wouldn’t be comfortable with should interest rates rise. However, it’s important to consider that in the current environment, fixed rates are generally higher than variable rate loans.
Is It Flexible Enough?
While fixed-rate loans are great for your security they are also not particularly flexible.
Many fixed-rate loan products won’t allow you to make repayments over and above the normal repayment schedule. There are also costs involved if you choose to refinance, which are generally a lot lower with a variable loan.
How Long Should I Fix My Rate?
When taking out a fixed-rate loan, you’ll generally have the choice of fixing your home loan rate for between 1 and 5 years, with longer terms up to 10 years available from some lenders.
Once again, a longer-term plan gives you a degree of security that you wouldn’t have with a variable loan. However, you might expect a longer-term fixed-rate home loan to come with a higher interest rate to protect the lender.
How Much Should I Fix?
Most lenders will offer you the flexibility to fix a certain percentage of your total home loan.
Fixing only some of the loan might be a good choice for homeowners who want some security with their interest rate, but don’t’ want to lock themselves into anything that might cost a lot in the long run.
Assess how much you might be able to pay down on the variable portion of your home loan through making additional repayments. Then you’ll have a good idea of what percentage of the loan you could look at fixing.
If you have a question or would like more information, please contact…
Steve
Mobile 0423 894 864
steve@bettermoneylenders.com.au
Brett
Mobile 0428 156 680
brett@bettermoneylenders.com.au
