Fixed vs Variable Rates
Fixed vs Variable Rates: There are many things to consider when you’re thinking about taking out a home loan. Therefore, one of the most important decisions you’ll have to make is whether to get a fixed or variable-rate loan. Here’s a breakdown of the pros and cons of each option:
Fixed rate
Fixed rate home loans offer borrowers predictability and stability. As a result, Your interest rate will stay the same for the entire fixed duration of your fixed period. You can fix your loan for either 1,2,3,4 or 5 years, which can be helpful if interest rates rise in the future.
Variable-rate
Variable-rate home loans are more flexible, but they also come with more risk. As a result, your interest rate may vary depending on market conditions, it’s important to be comfortable with taking on that risk. That said, variable rates are often lower than fixed rates, so you may end up saving money in the long run.
Ultimately, the decision of a fixed or variable home loan comes down to your personal circumstances and preferences. If you like knowing exactly how much your repayments will be, a fixed home loan may be a good idea. The only issue that you have here is that you will not be able to change your rate if the rates start to drop. You also have to consider that your circumstances can change, and if they do, breaking your fixed home loan can be costly.
In other words, If you’re comfortable with a bit of uncertainty and are happy to adjust your repayments if rates change, a variable home loan could be a good option. Just remember that rates could go up as well as down, so it’s important to budget carefully.
Take some time to research your options and have a look through our glossary of terms and other helpful news articles.
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