What Are Fixed Rate Home Loans And Split Rate Home Loans?
Fixed Rate Home Loans: Is your mind not in peace and are you having a lot of confusions to know more about loan repayment immediately? You problem gets solved by Fixed Rate Home loan, which helps with a security to repay the loans with fixed interest rate for fixed period of time. This fixed rate loan helps you to prepare your monthly budget correct and exact.
The duration period is around one to five years as the repayments are fixed along with the period of fixed rate time. By the end of the fixed time, you will have an option of changing to the standard variable rate or a mixture of split loans.
Do you know what is the correct period to fix the interest rate for a home loan?
Due to the financial circumstances which are not under control, even the best economists are not able to predict when the interest rates will increase or decrease. Based on this reason, many borrowers prefer to fix their loan for a time period of less than 3 years.
Do investigations before you consider taking a fixed rate home loan as to know the current financial situations and trends so that it helps us to get an idea about the interest rates where they are? It’s always a thumb rule that everyone likes to fix the interest rate when they are very low and are at the bottom of the interest rate cycle.
Following all the advantages and disadvantages of the fixed rate home loan:
The Advantages are Equal repayments each month, You can plan your finances due to stable - fixed repayments and you can stick to your budget even in uncertain economic times, the interest rates don’t change for every month repayment.
The Disadvantages are You will be paying more loan amount than the variable interest payers if the interest rates fall, Most lending institutions limit the sum of extra repayments you can have each year, You don’t have an option to pay off the home loan before the expiry date else you will be penalized, there is no redraw facility in the fixed loans features.
Split Rate Home Loans: Want added security of a fixed rate home loan but also the flexibility of a variable rate home loan? With a Split Rate Home Loan you can have exactly that.
What makes a Split Rate Home Loan attractive for first time and existing borrowers is the ability to customise the home loan and add as many features as required. A Split Rate Home Loan can be split in many combinations, e.g. 50/50 split or 80% variable and 20% fixed provided it meets lenders policy
Consider the following pros and cons before you decide on a split rate home loan:
Split Rate Home Loan Pros are setting up a part of your loan can keep you beside prospect interest rate rises, Separate part of your loan at a variable interest rate permits you to promote with a lower rate if interest rate falls, Encompass a fully featured home loan by joining several splits together.
The Cons of a Split Rate Home Loan are Different costs might apply to different portions of the loan e.g. fixed rate loans have a high break up cost, Limited amount of extra repayments might apply to the fixed portion of the loan, Flexibility to move to another lender might be costly due to the fixed component.
