One of the most important decisions when structuring a home loan is choosing between a fixed rate, variable rate or split loan. Each option has advantages and risks.
In the current Australian market, interest rates remain an important factor for borrowers. This makes it even more important to choose a structure based on your budget, risk tolerance and future plans.
What is a fixed rate home loan?
A fixed rate home loan locks in your interest rate for a set period, usually between one and five years. This provides repayment certainty and can make budgeting easier.
Benefits of fixed rates
- Repayment certainty
- Easier budgeting
- Protection if rates rise during the fixed term
Things to consider
- Limited flexibility
- Break costs may apply if you repay or refinance early
- Offset features may be limited depending on lender
What is a variable rate home loan?
A variable rate loan can move up or down depending on lender pricing and market conditions. Your repayment may change when rates change.
Benefits of variable rates
- More flexibility
- Potential access to offset and redraw
- Easier to refinance or make extra repayments
- Potential benefit if rates decrease
What is a split loan?
A split loan allows you to fix part of the loan and keep the rest variable. This can provide a balance between certainty and flexibility.
How to choose
The right option depends on your income, expenses, future plans, repayment comfort and appetite for risk. A first home buyer may want repayment certainty, while an investor may prefer flexibility.
How Nine Fincap can help
Nine Fincap compares fixed, variable and split loan structures across a broad lender panel to help match your loan to your financial goals.
Not sure whether to fix, stay variable or split your loan? Compare Loan Options with Nine Fincap.
Disclaimer
This article is general only. Rates and product features may change. Approval is subject to lender assessment.