Home Loan Options for Adelaide Investors and Families: Fixed-Rate Home Loans
Fixed rate home loans
Fixed rate home loans, variable rate home loans or split rate home loans are all options for mortgaging your home.
The ‘fixed rate’ term means the interest you are charged on your mortgage is ‘locked in’, usually for the initial loan period of one to five years.
Since the rate doesn’t change, there will be no surprises for as long as the loan remains fixed.
This means that in those first few years while you have other things to fit into your budget, such as new furniture or home renovations, you’ll know exactly how much you have to budget for your mortgage repayments.
If the Reserve Bank increases these rates, it means that running costs for individual banks are higher, which gets passed on to the customer.
When you have a fixed rate home loan, you are protected from those running costs getting passed on to you.
Locking in your home loan rate will mean that even if the Reserve Bank raises the official interest rate, you will not pay any extra.
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What happens after the initial locked in period?
Similar to other forms of home loans, a fixed rate home loan may have a total loan length expectancy of 25 or 30 years.
After the set period of interest rate stability of a fixed home loan comes to an end, you will need to talk to the experts about the next step.
If you have enjoyed the protection from interest rate fluctuations that a fixed loan offers, then you will be given the option to continue your loan repayments with a fixed rate.
In the intervening time however, the market may have changed and these new rates will be negotiated according to market at the time, so you may not necessarily receive the same fixed rate.
While those interest rates may have increased, it could also mean that they have dropped in that time.
Alternatively, you will have the option to switch to a variable home loan, which is sensitive to current market rates at all times.
What you may not like about a fixed home loan rate.
There are conditions of a fixed loan that may not appeal to some people. One of the main reasons for this is the limited capacity for early repayment.
If you come across some extra money and wish to use some or all of it to repay your mortgage, a fixed loan will only let you repay a limited amount.
That limited amount can vary from lender to lender but it is usually set as a dollar figure per annum over the minimum repayment.
This can make an early pay-out of your mortgage an issue, so should be considered if you think this may be a problem for you.
The flipside of interest rate fluctuation protection is that if the official rate falls, you will not benefit from a decreased rate.
These drawbacks need to be considered against the benefits of a fixed rate home loan.
If you like the idea of stable repayments, talk to AAA Mortgage Solutions about a fixed rate home loan today.
We are happy to answer any of your questions about our many mortgage solutions and specialise in tailoring options to suit your unique circumstances.
Phone AAA Mortgage Solutions now to arrange a chat, on 1300 555 888.