Fixed or Variable Interest Rates on Home Loans- What would be the Wiser Choice?

Buying yourself the home of your dreams isn’t as difficult a task as it may seem. Just by adding a little bit each and every month, you can pay off your home loan years in advance.

Whilst there is no way to predict the future trends in the economy, what must be done is the complete study of the subject that you’re engaged in. If you are looking forward to a home loan, then this is for you. To understand which type of loan service suits you best, you must completely understand the Home Loan Comparison between Fixed and Variable loans in order to make a wiser choice.

Advantages

Fixed rate home loan are the ones that have a fixed rate of interest. Fixed Rate Home loans offer you a great amount of certainty as it the rate of interest implied on them is not subject to an increase. This gives the borrower the security of repayment and a chance to plan further expenses in a better way. Moreover, when the rate of interest on home loans falls, you can take advantage of borrowing money from the bank at a lower rate of interest and retain that rate even if the actual rate of interest rises. This, in turn, could possibly lower the total amount of interest paid over the loan term. If you wish to be able to set up a budget and make your repayments of a consistent amount, opting for a fixed home loan will prove to be the superior choice.

Disadvantages

While the increase in Fixed Rate Home Loan may benefit you in the long run, it might also put you in a loss if the rate of interest decreases with the course of time. If you opt for a fixed rate home loan and wish to switch to a variable rate or refinance or sell your property, then you will have to pay a break cost which can be quite high depending on the fixed term of your loan. Another disadvantage is that the Fixed Rate Home Loan has numerous restrictions on making additional repayments.

Best of both worlds

You could also consider fixing a part of your mortgage so that you get the security of a Fixed Rate Home Loan and the flexibility of a Variable Rate at the same time. Most importantly, you need to weigh up your individual circumstances and goals before making any decisions on how to structure your loan so that you don’t miss out on any of the best home loan rates.

This information is general and is subject to change at any time. Your financial situation must be assessed before acceptance of any proposal or product. For further assistance, you must contact Your Finance Adviser Lending Specialist to avail the best home loan rates in Australia.