Fixing your home loan can be a great way to save you money by reducing your monthly loan repayments. However, most home owners are not aware of the possible pitfalls of fixing the interest rate on their home loan.
Are you currently making extra repayments?
Most lenders will restrict the amount of extra repayments you can make during the fixed term of your loan. If you are currently making additional repayments on your home loan and are enjoying the interest savings, you will need to compare these savings if you are to make the switch.
I want an offset account
A transactional account linked to your home loan (offset account) can be a great way to save interest on your home loan. Unfortunately most lenders will not allow an offset account to be linked to a fixed rate home loan.
No redraw allowed
If you have been making additional repayments in the past with your current variable rate loan, you have probably enjoyed the convenience of redrawing these extra funds to use at a later date. By switching to a fixed rate loan, most banks will not allow the redrawing of these funds during the fixed rate period.
Break costs will apply
If you plan to sell or refinance your home during the fixed rate period of your loan, be careful. Banks can still charge a ‘break cost’ if you pay out your loan before the end of the fixed rate period. This can cost you thousands.
If you would like a complimentary home loan review in the Heidelberg, Ivanhoe area or surrounds, please call Ashley on 0425 826 967