July 01, 2017
Have you been wondering about the pros and cons of getting a Fixed vs a Variable Home loan?
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 than fixed rate home loans, with features like redraw facilities, and the ability to make additional repayments.
If you get a fixed home loan – your payment amount will not fluctuate for the length of the fixed period, usually between 1 – 5 years. This means that if home loan rates go down, your rate will stay the same, and this can be frustrating.
Early repayment of a fixed loan may incur break costs, which can be substantial. As well, many lenders limit additional payments to the loan.
Whereas, if you have a variable home loan and interest rates go down, so can your required payments if you choose to decrease accordingly.
Another pro with a variable home loan, is that if you have surplus cash each month or want to make a lump sum deposit, you can pay off your principal without any penalty.
But, there is also the risk that your interest rate and repayments can change at any time - this can introduce a bit of unpredictability.
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.
To truly make the best decision, you should meet with Russell Crook, our expert home loan broker at Mortgage Choice in Joondalup. He can sit down with you, review your situation and your future goals and provide you with expert advice on the right home loan for you. Give him a call on 9300 9322 today to make an appointment.