Is it Time to Fix Your Home Loan?
With rates being still at record low levels, a lot of borrowers are wondering whether or not they should fix their home loan. Before you make that decision there are some pros and cons that you need to consider.
- You know exactly what your repayments will be for the entirety of the fixed period.
- You don’t have to worry when rates are put up, either by the Reserve Bank or out of cycle lender rate increases. If rates go up you remain at your fixed rate.
- Fixing can be a solution if you know you have a period coming up where extra income may be restricted – i.e. maternity leave – and if rates were to go up during that period it may make things tough.
- If rates go down you are locked in at whatever the fixed rate is.
- If you need to break the fixed rate period – i.e. selling the property or you want to refinance elsewhere – there are early payout penalties.
- Most offset products do not fully offset against a fixed loan.
- The amount of extra payments you can make are generally limited. For example, it might be that you can only pay an extra $10,000 per year and this may have to be factored into your regular repayments.
Whilst it is difficult to be sure if you will be better off with a fixed or variable home loan rate, considering these pros and cons is a good start to help you make a decision. Always consider your future plans. If you are planning to sell your property soon or make changes that require refinancing, it is important to take these into account as you are making the decision to fix or not. If you are looking to fix, investigate all options, i.e. whether a fixed product with a full offset facility is an option for you. Some borrowers may elect to fix part of their home loan and keep part variable.
A mortgage broker can help you work through the fixed and variable options available from a large range of lenders.
Contact us to see how we can help you decide if fixing is right for you or not.