July 24, 2014
This is a question that I commonly get asked and unfortuantely there is no simple answer. The reason for this is that everybodys circumstances are different. The main questions you need to ask yourself are:
- Am I happy with my current lender
- Are my circumstances going to change during the likely fixed rated term
- Do I anticipate needing to relocate due to a work transfer.
- Am I looking to add to my family so I will need a bigger home sooner rather than later
The primary benefit (as I see it) for locking in a fixed rate at the moment, with 5 year fixed rates down as low as 4.99% (which is amazing), is to get the surety of your repayment amount for an extended period.
The down side is that if you need to break your fixed rate loan at any time during the fixed rate period the lender will be able to charge you a break fee. This could be many thousands of dollars so check with your lender what your exit costs will be.
Th key point to remember is don't lock yourself into a fixed rate for 5 years if you think you will need to sell before the end of the fixed rate period as it might end up costing you more in exit fees and break costs than you saved in having the better interest rate.
If you have any questions about fixed rates or any other home loan related questions please give me a call on 04322 81837