Interest - Fixed Rate Or Variable Rate?
If you are in the market for a mortgage, chances are you have more than a passing interest in, well, interest. And it can pay too - literally.
Your loan’s interest rate will dictate how much extra you pay on top of the value of your house, so you’ll want to carefully consider your options.
Home loans generally come with either a fixed or variable interest rate, though a combination or split interest rate is also possible.
A fixed interest rate loan will mean that your repayments will be the same for the length of time you fix your loan. This can give you certainty about what your mortgage payments will be during this term.
Variable interest rate loans, on the other hand, are subject to changes in the official cash rate set by the Reserve Bank of Australia. If the RBA adjusts this, banks and lenders tend to follow suit.
Choosing what type of loan is right for you depends on market conditions. If current interest rates are relatively low, a fixed rate loan can take advantage of this. If they are high, a variable rate solution means you will benefit from any future decreases.
You can use a loan interest calculator to see how various interest rates will affect the value of your repayments.
To get more detailed information on your situation, talk to a Loan Market mortgage broker today.