It’s important that you consider what will best suit your needs now, but will also offer flexibility into the future.
Some of the things to consider when choosing a home loan are:
With a variable rate loan, the interest rate is likely to fluctuate throughout the term of the loan, and therefore your repayments will also fluctuate.
To safeguard against interest rate rises you can fix your interest rate for a period of time. This option gives you the peace of mind of knowing what your repayments will be during this period and that there won’t be unexpected changes.
The benefit of a variable rate is that you can usually make extra repayments into your loan to reduce the interest payable and hopefully the term of your loan. With fixed rate loans, there can be limitations on the amount of extra repayments you can make. Fixed rate loans are locked in, so if interest rates go down, you may end up paying more than you would if you have variable rate. However if rates go up and you have a fixed rate you’ll be ahead.
Some banks, like Victoria Teachers Mutual Bank allow you to split your loan into variable and fixed. This way you can take advantage of the benefits of both options; to safeguard a portion against future rate rises whilst also being able to make extra repayments into the variable portion.
Ultimately, you need to assess your options and make a decision based on what you’re most comfortable with.
There are a number of additional features that can save you money and time paying off your mortgage:
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