With so many great fixed rate products on the market at the moment, does it make sense for you to make the switch to a locked-in home loan?
There are plenty of reasons why a fixed rate mortgage is a good move, and just as many reasons why you should stay on a variable rate!
Ultimately, the decision comes down to your appetite for risk, your financial situation and your plans for the property.
If there’s a chance you’re going to sell in the next few years, then it’s worthwhile sticking with a variable rate so you have flexibility. On the other hand, if money is tight and you’d like the stability of a locked-in mortgage repayment, then a fixed rate offers peace of mind.
If you've decided that fixing is the best thing for you, there are three other things mortgage broker
Medine Simmons from www.mfsimmons.com.au
says you need to think about before you make a move”
1. Who is offering specials?
“It's worth hunting around at the moment because there are some great ‘end of financial year’ specials on offer,” Simmons says. “St George have just extended their two-year rate of 6.99%, which is less than most variable loans. AMP is offering three years at 7.19%, again a rate that's competitive with variable rates. Or, if you prefer the non-banks, you can get 7.15% for three years with the Police and Nurses Mutual Bank.”
2. Who offers extra repayments?
If want a fixed rate, you might miss out on the opportunity to be able to make extra deposits. Before you sign, check out how much you can deposit before there's a penalty fee. “Be very clear about the parameters – ask, is it $5,000 per year that you’re allowed to deposit, or is it $5,000 over the fixed period?” Simmons explains.
“If you think you'll have lump sums that you want to deposit you might consider Heritage Building Society, who allow unlimited extra deposits. Or you could even split your loan so there's a variable component that allows lump sum repayments.”
3. What flexibility do you need?
If you have a professional package and you move to a fixed rate loan, “you might miss your offset account”, Simmons warns. “Some banks still offer offsets on fixed loans too, but you have to shop around – look for 100% offset on fixed loan accounts. Adelaide Bank and The Rock Building Society are worth a look if you think you want this feature.”
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan