April 03, 2014
When deciding whether you should fix in your home loan rate, there are some things for you to consider based around the loan flexibility, features and cost.
To get the best of both worlds, many borrowers are now choosing to fix part of their loan.
With rates at historically low levels, lenders are fiercely competing with each other to attract and retain customers, discounting their variable and fixed products alike. All this choice can make it confusing so you need to consider what else is important about your home loan.
Fixed rate loans provide peace of mind, keeping repayments stable over a fixed term.
However, fixed rate loans tend to offer fewer or reduced features such as the ability to make extra repayments or the ability to re-draw funds. You may also incur costly break costs and a switch fee should you decide to move away from that loan type before the end of the fixed rate period. The cost involved with breaking a fixed rate term can be quite high depending on when you fixed, how long you fixed for and what the interest rate was at the time compared to where market rates sit now.
Variable rate loans tend to be more flexible in nature (with features as well as the interest rate) and you can take advantage of falls in market rates.
But when rates rise so to do your repayments. Most lenders also offer an offset feature against their variable loans. The funds in an offset account are used to offset or reduce the interest repayments; lenders have different policies on how the offset is calculated that we will discuss at a later date.
To Split or not to split.
Many borrowers now are opting to “split” their mortgage into fixed and variable portions. Splitting your loan gives you the borrower peace of mind fixed rate/ known repayments whilst maintaining some flexibility to repay extra or redraw funds on variable portion if and when you need them.
When making your decision, the key is to educate yourself as much as possible by researching your options, taking into considerations the wide range of loans and lenders available.
Save time by giving us a call.
As your local mortgage brokers from Mortgage Choice in Noarlunga we can do all the leg work for you by helping you compare loans from a wide range of lenders based on the loans’ interest rate, fees, features, flexibility, and the lenders’ customer service performance.
To learn more about your options contact Fi.
Fiona Manley 0421 360 205