Should I Fix My Home Loan?

By Matthew Kenworthy | News

The interest rate is just one of the factors to consider when choosing to fix your home loan. Currently we have access to many low fixed interest rates from a variety of lenders.

Lender & Loan Product Fixed Rate Term Interest Rate Comparison Rate
Unibank 1 Year Fixed Option 1 Year 3.69% 5.02%
Bankwest Complete 2 Year Fixed Home Loan 2 Years 3.69% 4.29%
Auswide Bank 3 Year Fixed Freedom Package 3 Years 3.69% 4.87%
NAB Broker Homeplus 4 Year Fixed 4 Years 3.99% 4.68%
Westpac 5 Year Fixed Premiere Advantage Package 5 Years 3.99% 4.75%

The information in the table above is correct to the best of our knowledge as of 30 August 2016. It should not be relied upon when deciding on the appropriate home loan product for you. If the information is important to your decision we recommend clarifying the changes with your bank or broker.

These rates are for Owner-Occupied lending and Principal & Interest Repayments. Higher interest rates may apply if for Investment and/or Interest Only lending.

Whilst these interest rates are attractive there are questions you need to ask yourself.

Will I Need To Make Extra Repayments?

Variable rate loans have no restrictions on extra repayments. You can pay an unlimited amount extra with no penalties.

Fixed rate loans are different. Each bank has different rules relating to how much extra you can repay.

Some lenders won’t permit any extra repayments. Whereas others will specify how much you can repay during the fixed rate term. Then there are lenders who will allow you to make extra repayments up to a set amount per year. This tends to range between $5,000 to $10,000 per annum. These rules vary from bank to bank.

Are you planning on making extra repayments? If so, how much extra are you planning on repaying?

These questions are important to ask yourself before choosing a fixed rate loan.

Will I Need To Redraw On My Loan?

Whilst many lenders will allow you to make extra repayments,few will allow you to redraw them if you need to.

If you repay extra into a fixed rate loan you generally won’t be able to redraw until the fixed rate term expires. If this is important to you discuss it with your bank or mortgage broker before fixing.

Am I Likely To Sell My Property While The Loan Is Fixed?

While there is no penalty for paying out a variable rate loan early there are for paying out a fixed rate loan. If you think you might sell your property soon a fixed rate loan may not be for you.

For this reason many borrowers generally choose to fix their rates for either 2 or 3 years. 5 Years can be a long time to forecast ahead. Most borrowers confident that they’ll be living in their property within shorter timeframes.

Early repayment penalties may also apply if you look to refinance your loan while it is fixed.

Summary

If you’d like to discuss whether a fixed rate loan is right for you we can help. We know each banks rules when it comes to fixed rates, and can pair you with the right loan for your situation. Please get in touch with us about our obligation free mortgage broker service.

About the Author

Matthew Kenworthy is a specialist in all aspects of Residential & Commercial Finance. He can assist all borrowers from First Home Buyers to Property Investors with Large Portfolios.