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Fixed Rate Home Loans

Lock in a your rate with a fixed rate home loan

Fixed Rate Home Loans

It's not easy to choose between a fixed rate or a standard variable home loan. This brief article will help you understand the advantages, disadvantages and differences between them.

What is a Fixed Rate Home Loan?
By definition, fixed rate home loans are loans that are taken out for a specified period with a specified interest rate. When this period ends, you are allowed to fix the rate again or alter it to a variable interest rate which is volatile, due to market fluctuations.
With a fixed rate home loan you know the exact repayment amount you will need to make. As a result, they offer certainty and security to the applicant.

What is the Difference between a Fixed Rate Home Loan and a Variable Rate Home Loan?
A variable rate home loan offers more flexibility and choices as compared to a fixed rate home loan. In a variable loan you can usually alter your repayment levels to pay off your loan faster and you may pay an increased or lowered interest rate depending on what current rate your lender is prepared to offer you. Banks and other lenders typically price in a premium or discount rate with a fixed rate home loan depending on whether their outlook is an environment of rising or falling interest rates. So in an environment of falling rates lenders will typically offer fixed rates at a discount to standard variable loans and in an environment of rising interest rates, fixed rate loans will typically be priced at a higher rate.

Is there a Disadvantage to Fixed Rate Home Loans?
In some cases, fixed rate home loans penalize you for making early repayments. This means that if you wish to pay down your debt faster, you will be forced to pay a fee, or keep the loan for the original term and pay the complete interest amount.
Sometimes you will need to consider the term of the loan which may be between one to five years and sometimes even up to ten. This offers the borrowers a sense of assurance and stability along with a bit of elasticity so that they can repay on time.

What Should You Opt For?
A fixed rate home loan can protect you against the case of higher interest rates in the long term. However if interest rates do not rise substantially you may end up paying more over the life of your fixed term.

How Should You Decide?
Your financial condition primarily affects the decision of the home loan you take. Ultimately the decision is your own, taking into account your budget, income and objectives. By considering all of these factors you will be in a much better position to opt for a loan that is less financially risky and offers the least headaches.

Get a free fixed home loan quote.

If you would like to discuss obtaining a fixed rate home loan please call us on 1300 724 342 or fill out the fill the enquiry form in the left hand menu of this page.