February 08, 2017
I'm often asked, "Should I fix my mortgage or stay with a variable home loan?"
The answer is, "Yes!"
Your personal circumstances will determine whether fixing all or part of your home loan is the best move for you and your family. With the Reserve Bank leaving the cash rate the same for another month, lenders are continuing to offer attractive rates on their 2yrs, 3yrs and 5yrs fixed term products. This is a good time to review your current rate and see whether there is a better option for you.
The advantages of a fixed rate mortgage:
1. The mortgage repayments amounts are fixed for a 2, 3 or 5 year term so you will pay the same amount for that time. You may choose to fix all of your home loan or only a portion so this provides a degree of certainty in the household budget.
2. If interest rates rise during the fixed term, you will continue to pay the fixed amount.
The disadvantages of a fixed rate mortgage:
1. If you need to break the fixed term (for example if you sell your home), there may be break costs applied by the lender.
2. Some lenders limit the extra repayments that you can put into your home loan during the fixed period. You also may not be able to withdraw any extra repayments from the loan during the fixed rate term.
3. If interest rates decrease during your fixed term, you will not be able to take advantage of the lower interest rates.
So, if you are planning to stay in your current home for a few years, would like some certainty in your household budget and would like to take advantage of historically low interest rates, give me a call and we can arrange a time to look at what will work best for you.
Mark Scherer 0403 577287
For those of you who are more visual learners, I've included a video as well!