Fixed Interest Home Loans

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Fixed Interest Home Loans have the interest rate and loan repayments fixed for a certain period of time of  between 1 and 10 years. At the end of the fixed rate period, the interest rate will normally revert to a variable rate. Generally, fixed interest rates are a bit higher than the variable interest rates. Fixed rate loans are less flexible than variable rate loans, and there are usually penalties to be paid to vary the repayment amount. But there are benefits as well.

A common question we hear is: "Should I choose a variable rate or a fixed rate home loan?" Well, as mortgage brokers we are not allowed to provide financial advise and therefore cannot answer this question......and anyway who can predict the future.
Even economists who specialise in this area can't always predict what is going to happen with interest rates. However, if it was so that variable rates worked out to cost less in the long run, that would be cold comfort to a borrower who has a tight budget and who could not risk a rise in interest rates, with an accompanying increase monthly home loan repayments.

For some borrowers, perhaps it may be prudent to fix the interest rate for a set period of time until they believe that they will be in a better financial situation to be able to cope with an interest rate rise, and thereafter go onto a variable rate.

A borrower looking for flexibility and certainty, may consider splitting the loan into a variable rate component and a fixed rate component. This is called a Split Home Loan.

To gain the benefits of a fixed rate home loan and the benefits of a variable rate home loan, a borrower could combine a variable interest loan with a fixed interest loan into a Split Home Loan. This provides some security against interest rate rises.




Here are some of the Pros and Cons of using a Fixed Interest Rate Home Loan:

Some Pros
-Possible savings if official interest rates rise
-Protection against rising interest rates
-Peace of mind of having a set monthly payment for those on a tight budget
-Interest rates are fixed for a set term



Some Cons
-Possibly higher interest costs should official interest rates fall
-Offers less flexibility
-Fixed interest rates are generally higher than variable interest rates
-Extra payment restrictions
-Less features
-High exit fees of a fixed rate loan




Why not let a friendly and helpful Professional Mortgage Broker help you get a home loan to suit your needs. We are a Sydney NSW based Home Loan and Mortgage Broking Specialist ready to help you with your home loan needs. Wheteher you are in Sydney North, Sydney South, Sydney East or Sydney West, Contact us NOW! We look forward to being of service to you.


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Pros and Cons of Fixed Interest Rate Home Loan

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