When choosing a loan, you’re likely to have the option of choosing a variable, fixed or split rate loan.
- A fixed rate loan allows you to lock in an interest rate, typically for 1 to 5 years;
- A variable rate loan means that your interest rate goes up and down in response to changes in the cash rate and other changes by your credit provider; and,
- A split rate loan lets you pay a fixed rate on a portion of your loan and a variable rate on the rest..
PRO'S & CON'S
There are pros and cons to each of the above options, and the option most suitable for you will depend on your personal circumstances.
Fixed Interest Rate's
PRO's: a fixed interest rate safeguards you against interest rate rises in the future and offers stability in budgeting and knowing your future repayment amounts.
CON's: a fixed interest rate loan may include fee's for making early repayments an exiting the contract early.
Variable Interest Rate's
PRO's: a variable interest rate offers flexibility and may allow you to benefit from reduced costs as a result of lower interest rates in the future.
CON's: a variable interest rate loan may cause you difficulty in budgeting and not knowing the exact amount of future repayments. With a variable rate loan you may also be exposed to rate increases increasing your costs.
ASK YOURSELF QUESTIONS LIKE...
When choosing between a fixed, variable or split rate loan, it can help to ask yourself questions such as:
- How much do I value the security of always knowing the exact amount of my loan repayments?
- How flexible do I need my loan and repayments to be?
- Do I want to be able to access extra repayments that I have made towards my mortgage?
- Is it likely that I will want to refinance my mortgage in the next few years?
WE ARE HERE TO HELP
If you are struggling to decide what type of loan is most suitable to your current situation we are here to help. You can contact your broker direct, send us an email, or contact our head offices on 1300 663 943.
iconic brokers are highly experienced in assisting clients understand the different loan products available to them and the benefits associated with each. Your broker will help to make sure that you are using the most suitable financial solutions available to you at the current time in the current market.
Thanks for reading guys, have a great week!
iconic home loans
Australian Credit Licence No. 391507
*Finance and interest rate availability is subject to applicant meeting lenders qualifying criteria and all approvals are at the discretion of the chosen lender. The information provided in this article is general only and should not be relied upon whilst making any decisions in relation to your personal finances. You should seek independent advice before making any decisions in relation to your personal finances.