Call 1300 13 20 70
Lawform Financial Services Group Pty Ltd
12 View Street, Camden, NSW 2570
12 View Street, Camden, NSW 2570
Fixed or Variable Home Loans?
Many clients ask the question: “Should I fix my loan and keep it in a variable rate?” Unfortunately Brokers just like borrowers are unaware of rate changes until they occur. Over the years we have listened to many leading economists who suggested that rates were rising, but in fact rates went in the other direction.
Lawform’s best advice to its clients would be to find a rate (fixed or variable) that suits your budget, your expectations and future financial situation.
If you feel threatened by a rate rise due to borrowing at your maximum capacity then maybe that is the time to fix your loan – allowing you peace of mind and budget control.
The standard interest rate that is charged on a home loan is known as a variable rate. This means that it will change according to the rates set by the Reserve Bank of Australia. The Reserve Bank can change rates in response to economic circumstances, and lenders will follow these changes (although not always offering the full decrease or rise). Rates can vary up or down during the term of your loan. A variable loan allows for more flexibility such as extra repayments, redraw facility, early repayment and offset accounts (reduction of interest).
In order to protect yourself from these fluctuations you can apply for a loan at a fixed interest rate for a period of 1 to 5 years. This can help you budget for your repayments, especially earlier on in your loan.
You can also split your loan into a fixed rate portion and a variable rate portion, thereby getting the benefit of flexibility whilst also having some protection against rate increases.
Usually lenders will not allow you to make extra repayments or vary repayments with a fixed rate loan. These loans also carry penalties if you cancel or exit the loan prior to the fixed rate term expiring.
Lawform’s best advice to its clients would be to find a rate (fixed or variable) that suits your budget, your expectations and future financial situation.
If you feel threatened by a rate rise due to borrowing at your maximum capacity then maybe that is the time to fix your loan – allowing you peace of mind and budget control.
The standard interest rate that is charged on a home loan is known as a variable rate. This means that it will change according to the rates set by the Reserve Bank of Australia. The Reserve Bank can change rates in response to economic circumstances, and lenders will follow these changes (although not always offering the full decrease or rise). Rates can vary up or down during the term of your loan. A variable loan allows for more flexibility such as extra repayments, redraw facility, early repayment and offset accounts (reduction of interest).
In order to protect yourself from these fluctuations you can apply for a loan at a fixed interest rate for a period of 1 to 5 years. This can help you budget for your repayments, especially earlier on in your loan.
You can also split your loan into a fixed rate portion and a variable rate portion, thereby getting the benefit of flexibility whilst also having some protection against rate increases.
Usually lenders will not allow you to make extra repayments or vary repayments with a fixed rate loan. These loans also carry penalties if you cancel or exit the loan prior to the fixed rate term expiring.
