What is a fixed rate home loan?
Fixed rate home loans are for people who prefer a secure interest rate that doesn’t go up and down depending on the precariousness of the market. Typically they last about 3-5 years and those who take out the loan are required to repay a fixed amount each month. The benefit of a fixed rate home loan, over a variable rate loan, is that home buyers or investors don’t need to worry about any interest rate increases.
However fixed rate home loans come with some disadvantages. For example, you generally can’t make any overpayments, that is to say, you can’t pay more than the fixed amount. Break costs can also be an issue if you want to repay the loan in full or move it to another institution before the fixed term finishes.
Is now a good time to get a fixed rate home loan?
Interest rates in Australia have been falling over the past few months, so new homebuyers are currently more willing to take the plunge, especially with the government first homebuyer boost. Buying now gives you the chance to lock in a fixed rate loan while rates are low. Remember, situations could change in the next few years, so bear in mind that interest rate cuts or rises will be inextricably linked with the economic climate.
But fixed rate home loans have their setbacks too. Something to consider is: your financial situation could change within the next 3-5 years, and you might want to change a few things regarding your home loan. But you can’t always do this. With fixed rate home loans, you can’t pay off your loan in full before the fixed term finishes and you often can’t make extra repayments without the banks charging you penalty fees.
But there are ways to beat the system.
If you’re considering fixed rate home loans, the best things to do are:
- Stay clear of fixed rate loans that don’t let you make extra repayments.
- Split your mortgage into both a fixed and variable loan and take advantage of both types of home loans.
- Assess your financial position properly because if done correctly, fixed rate home loans can help you organise monthly spending and simplify your mortgage payments.
- Compare fixed rate home loans before you apply for one, because there are a lot to choose from!
How do I compare home loans online?
There are more efficient ways to compare home loans these days than browsing through dozens of websites or heading into different banks, because with the latest updates found in financial comparison websites like mozo.com.au, you can spare yourself from hours of research. By selecting particular features that you want, mozo.com.au helps you get a fixed rate home loan that’s perfect for you.
This article was brought to you by mozo.com.au – Compare Home Loans Online
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1 comment:
Great information.Some excellent ideas here I don’t have a news blog as such but there are some great tips that I plan to use.
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