When borrowing to buy a home, you can generally choose either a variable rate loan or a fixed rate loan. A fixed home loan rate can be an attractive choice for many people because it locks in a fixed repayment for an agreed period of time, giving you protection against interest rate increases.
This makes budgeting a lot easier compared to a variable rate where you’re exposed to the risk of increases in the interest rate.
The benefits of a fixed rate may encourage you to fix your loan, but there are also reasons why fixing your loan may not be a good idea. These can include restricted features and expensive break fees if you decided to make changes to your loan or refinance the loan during your fixed-rate period.
Determining whether you should fix or not fix your home loan is difficult. To help you with your decision-making, here are some questions to ask yourself before you decide to fix your loan:
No one can predict future interest rates, not even the RBA. For that reason, the main thing to consider when choosing between a fixed or a variable rate, is whether you want the peace of mind of a fixed rate home loan.
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