Is It Time To Fix Your Home Loan?

A fixed rate home loan explained

A fixed rate home loan is described as a type of mortgage  that features a locked interest rate for a set period of time, which is usually 1 to 5 years in duration. Unlike a variable interest rate or introductory rate loan, the interest rate and repayments on fixed-rate loans do not fluctuate with market rises and falls, making them an attractive option to some home buyers.

Advantages of a fixed rate loan?

The major benefit is the ability to lock in an interest rate and knowing exactly how much you will be paying every month is the main advantage of choosing a fixed home loan.

For people who have  less flexibility in their monthly budget, a fixed rate home loan has the potential to offer greater control and peace of mind.

Disadvantages of a fixed rate loan?

Whilst fixed home loans have better payment predictability, there are other factors to take into account, such as:

• They have less payment flexibility. Unlike variable rate loans, most fixed rate loans don’t allow extra repayments or the borrower to exit the loan early without incurring a penalty.
• You’re locked in – whatever way interest rates move. When you have a  fixed rate loan, you will lose out on falling interest rates.

When to consider a fixed rate loan?

Fixed rate loans can be a good decision for:

• people looking to buy their first home
• when families have tight budgets and household expenses
• investors who need reliable and predictable financing costs.

What about split home loans as a solution?

If you are undecided about whether to take a  fixed or variable rate loan, a split rate home loan may be the better solution by allowing you to split your mortgage into a fixed rate component and a variable rate component. With a split home loan, your payment won’t fluctuate nearly as dramatically when interest rates rise or fall.

A big advantage split home loans have over fixed loans is that you can make additional repayments on the variable portion, which can assist in reducing the overall cost of your mortgage. It should be remembered, however, that the fixed portion will still be subject to early exit fees.

It is essential when choosing a home loan,  to consider your needs, current and potential earnings  as well as long-term financial goals. Everyone has a different situation – so solutions vary from person to person – that’s where Miller Finance can take all your individual factors into consideration when finding the best solution to meet your needs and objectives.  Call today to get started.