Fixed Vs Variable home loan rates? Which is best?
Firstly what are Fixed and Variable interest rates?
There are many home loan options available and deciding on the type of Interest rate is just one of these options.
Generally there are two options, either a Fixed or Variable Interest rate.
Fixed Interest rate Home Loans are ones where the interest rate is locked in (or fixed) for a certain period, usually 1 to 10 years. The key feature of this loan is the Interest rate does not change over the agreed period and your repayments are the same and will not change for this term. Once the Fixed term has expired the loan usually reverts to a Variable Interest rate.
Variable Interest rate Home Loans, and usually the more common option for people is where the interest rate can increase or decrease over the term of your loan as decided by the lender. This is typically driven by decisions made by the Reserve Bank of Australia. This means for you that your required minimum repayment will increase or decrease in line with Interest rate changes issued by the bank.
There are pros and cons to each type of loan; we’ll discuss these later in the week. Consider the pros and cons to see which option is best for your personal circumstances.
Want the best of both worlds?
You may consider splitting your home loan; have a nominated portion as a Fixed Home Loan and the balance as a variable interest rate.
Have questions or need more Information contact Julie on 0437 095 312 at Greater Geelong Finance to work through your options together.
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