Fixed or Floating
There are pros and cons to each, and which one is right for you will depend on your unique lifestyle needs.
If you select a fixed-rate mortgage, you will be locked into one, stable home loan interest rate that will not fluctuate or change throughout the entire term of a loan.
Conversely, with a floating or variable mortgage, your interest rate will 'float' and change depending on a number of factors. Mostly, it will be affected by the Reserve Bank of Australia's decisions regarding the Official Cash Rate (OCR).
Right now, the OCR is at a record low 2.5 per cent, meaning that it is a great time to take out a fixed home loan and lock in a strong interest rate moving forward. A fixed home loan is also a better option for people who want some stability and predictability in their repayments.
However, a floating interest rate home loan could also be a good choice as it means that if the OCR goes even lower, your interest rate will likely go down as well. Furthermore, a floating mortgage will often offer greater flexibility and a number of other beneficial features.
It's worth weighing up both options carefully in order to ensure you make a decision that you will be happy with for years to come. And if you would like to secure the best of both worlds, you can also choose to split your loan.
By splitting your home loan, you can tie part of it to a fixed interest rate and part of it to a floating interest rate. That way, when conditions are good for one option and bad for the other, they will basically balance each other out. If you are unsure about which home loan option is right for you, consider talking to a professional and seeking expert financial advice. Take your time and do your research, and you will be able to secure the right home mortgage to suit your needs.