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Should I have a Fixed, Variable or Split Rate home loan?

Wondering should I fix my home loan or not?

In todays market, if you’re about to buy a house or you’re looking to refinance you may find yourself asking this.
The lure to the “all too tempting” low interest rates available, may have you think you need to lock something in now before it’s too late.


You should be asking yourself, what do you want from your loan and how can it work best for you?

So, what are the PROS and CONS?

Fixed Rate home loans are usually for an initial fixed period of time, often 1 – 5 years.
So where do you see yourself in the future and how would that future impact having a Fixed Rate loan?

Fixed Rates make budgeting easier with knowing exactly what you’re repaying, whereas with a Variable Rate loan, your repayments can ‘vary’ as rates change.

When there is a rate rise, you can be happy knowing with a Fixed Rate, this won’t impact you.

However, what if the rate drops? By having a Variable Rate loan, your repayments will decrease with the rate drop.
If, you were locked into a Fixed Rate loan, would you be disappointed with knowing you are now locked in for a set period of time paying more?

With your Fixed Rate, does your bank allow you to make extra repayments?
More often than not you will find by having a Fixed Rate won’t allow you to do this, whereas with a Variable Rate loan you can.

Fixed Rate loans may also have costly break fee if you change your mind or pay off your loan early (eg. your circumstances change and you need to sell your house) before the end of your fixed term.
Do you know your out of pocket costs if this does happen?

Though, there is an alternative to think of, a Split Rate.
You have the option to Split your loan in order to get the best of both worlds.
Some people Fix a portion of their loan a portion as Variable to manage some of the risk of interest rate rises while still being able to make those extra repayments in order to reduce their loan quicker.

There is no right or wrong option and it all depends on your own personal circumstances.
If you would like advice, contact our experience Mortgage Advisers to help and navigate the best option for you.