Fixed Rate Home Loans

Know your exact mortgage payments over the fixed term...

Fixed rate loans allows you to lock in an interest rate for the fixed term period. For example, a 3 year fixed term loan at 6.90% will remain at that rate for 3 years regardless of variable interest rate movements.

Most lenders place restrictions on their fixed rate loans such as;

• Restrict extra repayments to a limit each year beyond the minimum repayments.

• Do not allow the borrower to redraw extra repayments during the fixed loan term.

• Do not allow 100% offset accounts to be attached to the loan.

• Charge break fees if the borrower exits the fixed loan term early. Break fees can cost thousands of dollars.

However, some lenders will allow unlimited extra repayments, let you redraw extra repayments and attach an offset account to the fixed rate loan. Assessment of interest rate versus flexible features will need to be considered before selecting any fixed rate loan.

What to look for

• Making extra repayments beyond the maximum amount each year may incur fees

• Lenders that offer extra repayments, redraw and offset account without penalty

• Competitive interest rates and low fees

• The ability have both a fixed and variable rate

• Some lenders discount fixed rate loans if taken under a professional package

Advantages

• Know exact mortgage repayments.

• If interest rates increase you benefit from a lower interest rate.

• Some fixed loans allow unlimited repayments, offset and redraw.

Disadvantages

• If interest rates decrease you will not benefit from lower repayments.

• Most fixed loans do not allow unlimited repayments, offset and redraw.

• Extra repayments or exiting the fixed loan early can incur heavy break cost fees .