Fixed vs. variable - the pros and cons

As a general overview – a fixed rate home loan will have predictable repayment amounts over a fixed term and a variable rate home loan may not.

However variable rate home loans tend to be more flexible, with more features like redraw facility, and ability to make repayments etc than fixed rate home loans.

So what are the pros of a fixed home loan?

If you get a fixed home loan – your payment amount will not fluctuate for the length of the fixed period,  usually 1 – 5 years.

What are the cons of a fixed home loan?

If home loan rates go down, your rate will stay the same, and this can be frustrating.

Early repayment of the loan may incur break costs, which can be substantial.  As well, many lenders limit additional payments to the loan.

What are the pros of a variable home loan?

If interest rates go down, so can your required payments, if you choose to decrease accordingly.

If you have surplus cash each month or want to make a lump sum deposit, you can pay off your principal without any penalty.

The cons of a variable home loan

Your interest rate and repayments can change at any time so it can be unpredictable

But ...there is another option...

Another option is to make a bet both ways and fix only a part of your total home loan and leave the remainder on a variable rate, thus giving some stability.  

So why not contact your local broker today to get expert advice on the right home loan for you.

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