Are you tossing up between a fixed or variable home loan? Why not have both!
If you can’t decide between fixed or variable, a split rate home loan could be just what you’re looking for. With a split rate home loan, you get the certainty of a fixed rate loan while enjoying the flexibility and features of a variable rate loan. So, you really can have it all.
What’s the difference between the three you ask? We’ve broken down the different types of home loans available and what to look for when considering which is best for you.
Variable rate home loans move with the times, either going up or down as the official RBA cash rate changes or as your lender makes changes. If interest rates go down, you can enjoy lower repayments, and if rates rise your repayments will go up.
One of the biggest benefits of choosing a variable home loan is that you can access greater flexibility. If you want to make extra repayments, add an offset account or redraw facility, or refinance, that can all be done with no fuss when you have a variable home loan. The ability to make extra repayments can also take years off your home loan, meaning you could own it outright sooner.
What’s so good about a variable home loan?
What are the potential drawbacks?
A fixed rate home loan lets you lock in an interest rate at a point in time for a set period of usually between one and five years. This means you’ll have rate and repayment certainty during uncertain times or when markets may move. If the RBA cash rate rises, you’ll be safe knowing you’ve locked in your rate. This also means your repayments won’t change during that fixed rate term, making budgeting a whole lot easier.
The rate will default to the variable rate set out in your contract at the end of the fixed term, but you’ll usually have the choice to enter another fixed rate period, although it’s likely the interest rate would be different.
Why choose a fixed rate home loan?
Why wouldn’t I go with a fixed loan?
A split rate home loan lets you split your total loan value into two loans – some to a fixed interest rate loan and the remainder to a variable rate home loan. The flexibility of the variable rate loan means it can be paid off quicker if you wanted to, with the ability to redraw or shorten the term of the loan. Whereas the fixed rate loan gives you security knowing that part of the loan is not subject to rate changes.
Split rate loans are a great option if you want the best of both worlds – you can make the most of low rates and pay off your home sooner, while having peace of mind knowing that a portion of the loan is locked to an agreed rate for a set time.
What are the benefits of a split rate loan?
What are the potential cons?
There are pros and cons to fixed rate, variable rate, and split loans, so it’s important to make sure you do your homework and select the loan that works best for you and your circumstances. To find the loan that suits you best, you need to assess your situation, speak to your lending institution and weigh up the options.
If you’re unsure where to go for more information, or if you have any questions about the home loan process, you can call us on 13 25 77. Alternatively, book an appointment to speak with a specialist in branch, online or over the phone. If you have a broker, they'll also be able to assist you..
The above information does not take into account your personal objectives, financial situation or needs. Read the relevant Product Terms and Conditions before applying for any loan product in considering and deciding whether it is right for you. Please speak to your Accountant/Financial Adviser for guidance about your individual circumstances.
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