Whether you’re looking to buy your first home, upgrade, refinance or invest in a property, one of our finance brokers in Perth can help you find the home loan that’s right for you. The question is, fixed rate or variable rate? Our consultant will sit down and talk with you about the specifics of each and help figure out the best option for your financial situation.
So what’s the difference between a fixed and variable rate mortgage?
A fixed rate home loan involves locking in your interest rate for a set period of time. This contrasts with a variable rate loan, which goes up and down based on the economy. In certain situations, it can be advantageous to lock in a fixed rate mortgage, particularly if interest rates are expected to rise in the near future. The downside of this is that if interest rates fall unexpectedly, you will be stuck paying the original higher interest rate.
Because fixed interest rate mortgages involve a higher risk to financial institutions, their rates are usually above the current variable rate. One of the benefits is that it protects borrowers against rising rates. They also offer predictability for borrowers, because their payments will be the same for the entirety of the fixed rate period.
In general, fixed rate finance isn’t as flexible as variable home loans and most banks won’t allow you to make extra repayments. They can also be missing features such as 100% offset accounts.
Fixing your interest rate is a way to reduce risk, at the cost of a slightly higher rate. This is perfect if you want to avoid your repayments changing in the future.
The different types of home loans available in Perth
There are three main types of fixed rate home finance available in Perth; no frills, packaged and full featured loans. No frills mortgages are simple and don’t offer many features, but the rates can be lower than the other types. Package mortgages involve you shifting across all of your banking to the new institution. This can include your bank accounts, credit cards, insurance and other financial services. This may entitle you to a waiver of fees or discounts on some of your products, including a lower fixed rate. Full featured home loans offer services such as offset accounts and the ability to make extra repayments.
Talk to a mortgage broker for guidance on which loan is best for you
If you are looking at getting a loan in Perth and can’t decide between fixed rate or variable, have a talk with one of our experienced brokers. We can help explain the differences between the two and show you the lenders that are offering the best deals for your situation. We can also help you get the best rate and assist you with the paperwork. Come and have a chat with one of our team to learn more.