LOAN REPAYMENTS
FIXED-RATE OR THE VARIABLE RATE
Generally, there are three types of rates that you might consider to take:
- Fixed Rate
- Variable Rate
- Split Loan with Variable Rate and the Fixed rate
Although, it totally depends on your condition or will. No matter what choice you have, there’s no right or wrong option. Mostly, it depends on your condition. To help you with your decision, we are here to provide you with the best choice by analyzing your condition. We are a Mortgage brokerage company with a difference and we promise to provide you with exceptional advice compared to others in the market.
Let’s have a deeper look at each of the rates:
Fixed Rate Loans
In these types of home loans, the interest rate on your mortgage doesn’t change for a fixed agreed period (in most cases 1-5 years). This factor is independent of the official interest rates.
Variable Rate Loans
Here, the interest rate on your mortgage changes and is dependent on the official interest rates. If the official rates go down, your interest will also go down, and vice versa. But remember, if the Reserve Bank of Australia decides to increase the rates, then your home loan rate will also increase.
Split Loan with a Variable Rate and a Fixed rate
It is a combination of the principles of fixed-rate and variable-rate loan options. For example- if you decide that 70% of your home loans will be at a fixed rate, then the rest 30% loan will be decided based on the market values.
How do I know which option is best for me?
Are you wishing if there was some typical package offer providing an “All in one” rate? Sadly, there is none. The answer to the Fixed versus Variable question is too much complicated, as there is no certainty to the changes in the country’s economy. As a result, you need to determine your situation, your priorities, and your financial condition, also taking into account your level of earnings, security, and most importantly flexibility.
I know you are going through a difficult time, but worry not! Rands Financial Services Mortgage Broking Arm offer the perfect plan to help you choose between the rates by identifying a variety of home loan products that will definitely suit your needs. We are not some typical mortgage broker who just gives you a plan without considering your situation.
Before you visit us, you should have some knowledge about the pros and cons of the different rate options.
Fixed Rate Loans – Advantage
- Interest rates are fixed. Therefore, when the market rate rises, you won’t be charged extra.
- You can set the conditions of the loan, i.e.- the time period which is generally available from 6 months to up to 5 years.
- You will predict the loan repayment you have to pay over the time period, independent of market changes.
Disadvantage
- If your financial condition changes, and you want to complete the loan early, then additional fees will apply.
- During this time period, you may have to pay more than if you had chosen a variable rate plan, even if the market was on the rise.
- Not much flexible as a variable rate. You can’t repay any additional amount and redraw.
Variable Rate Loans – Advantage
- Your interest rate will fall when the market value falls.
- Provides you with plenty of flexibility and allows you to repay unlimited additional amounts.
- On average, the variable interest rate is lower than a fixed rate.
- Provides you with additional features. Some agencies have low introductory, also known as, “honeymoon rates” for a certain period of time before shifting to the usual rate.
Disadvantage
- Your interest rate will increase when market value increases and you are expected to make additional payments
- If market value increases rapidly, then you have to repay a greater amount compared to that if you had chosen a fixed interest plan over the same time period.
- If you borrow money close to your repayment capacity, it might be risky if the interest rate increases.
- Becomes risky in a rising interest market if you have gone beyond your loan capacity.
Are Split Rate Loans the best for you?
As Split Rate loans allow you to cut your loan amount into 2 separate portions of variable and fixed rates, adjusting to your economic condition, it is usually the best suit for someone who is thinking of buying a new home. In summary, split-rate loans are best for people who:
- Need some security.
- Wants to pay their loan early.
- Looking to buy a new home.
All these decisions are really hard, especially, if you haven’t taken a mortgage loan before.
Our mortgage brokers are expert on finding suitable loan products depending on the financial condition of the buyers.
