January 29, 2020
Should you fix or not fix your home loan? This is a question every homeowner has to grapple with at some point. With interest rates at all-time lows, you may be wondering if it is now a good time to fix your home loan.
There is no hard and fast rule as it will ultimately depend on your personal and financial needs which vary from borrower to borrower. It’s helpful to consider the pros and cons of a fixed rate home loan.
Check out the lowest interest rates from our panel of lenders.
Pros of a fixed interest rate
1. Certainty on your home loan repayments
Fixed rate home loans have an interest rate that is locked in for a set time ranging from one to five years. After the term ends, your loan switches to a variable interest rate.
With a fixed interest rate, your home loan repayments will remain the same.
Knowing exactly how much your monthly or fortnightly repayments are going to be makes budgeting easier. You can plan your spending and saving goals with confidence.
2. Your home loan won’t be impacted by interest rate fluctuations
If the official cash rate or your lender’s interest rates go up, your fixed home loan won’t be impacted and your repayments will remain the same.
Cons of a fixed interest rate
1. Rate drops won’t apply to you
The obvious disadvantage of a fixed rate is if lenders drop their interest rates which means you will miss out on the potential savings.
2. Limited flexibility
A fixed rate loan offers less flexibility. For example, you may not be able to make additional home loan repayments, or it may be capped at a low amount or only permitted if you pay a fee.
3. Break fees
Any act that causes you to terminate a fixed home loan early will result in a break fee to compensate the lender for any loss. An example is switching to another lender or home loan product which would force you to break your fixed-rate contract.
In addition, if you’re planning to sell your home, this will also incur a break fee.
Choosing to fix your home loan comes down to your personal decision and how you like to handle your finances.
You should do your research and see what lenders are offering at the moment. Be wary of media speculation about further interest rate drops as this can act as a deterrence. Our team at Mortgage Choice in Bayside can certainly help you understand the range of interest rates that could benefit you.
Fixing the interest rate on part of your home loan
Consider fixing part of your home loan if you’re not completely sold on the idea. That way, you have one part of the loan that remains the same and is protected against rate hikes.
If you’re thinking about fixing your home loan, make an appointment to speak with Mortgage Choice Bayside today. We will answer any of your questions and provide recommendations based on your current and future needs. We'll go through your budget as well, and talk you through the benefits of each option.
We'll be able to talk you through the pros and cons of fixing your interest rate at this time in the market. Call us on 9589 7277 or click on Contact Us to book an appointment with our Mortgage Choice Bayside team.
The team at Mortgage Choice in Bayside service the suburbs of Bentleigh East, Brighton, Brighton North, Brighton East, North Road, Hampton, Hampton East, Hampton North, Moorabbin, Moorabbin East, Heatherton, Bentleigh, McKinnon, Ormond & surrounds.
