You can manage your household budget better during the fixed period by knowing exactly how much is needed to repay your home loan.
Fixed Rate Loan
- Fixed interest rate loans generally have similar features and flexibility of a variable loan. However, the interest rate is locked in for usually one to five years and does not vary within the fixed term period.
- Your regular repayments stay the same regardless of changes in interest rates
- If interest rates rise then the advantage is your rate stays the same and you could be saving money.
- If interest rates go down, you don’t benefit from the decrease. Your regular repayments stay the same.
- It is possible to exit out of a fixed rate but sometimes there can penalties involved which generally cover any shortfall or losses the lender may incur from the transaction.
- A fixed rate option is usually available again at the end of the fixed period and can be beneficial dependant on what rate lenders are offering or you can change to a variable loan.
- There is very limited opportunity for additional repayments during the fixed rate period.
- You may be penalised financially if you exit the loan before the end of the rate period.