The Things You Should Consider Before Fixing Your Home Loan - Pearl Financial

The Things You Should Consider Before Fixing Your Home Loan

By Editorial Team | Home Loans

Nov 26

Borrowers have one important question to themselves regarding their Home Loan and that is either “to fix or not to fix?” It is crucial to think about your decision many times in order for you not to encounter difficulties in the process of settling repayments.

Australian borrowers are mostly attracted to fixed-rate home loan offers because of assurance. A fixed-rate home loan is the advisable home rate loan for first-home buyers as they are the ones who are tight on their budget. In doing so, they can carefully plan for their budget and stay on top of their repayments.

Now, if you decide to fix your home-loan rate you should take into consideration the following things:

You Should Fix Your Home Loan For A Span Of Three To Five Years

Most borrowers hose to fix their home loans in order to protect it from unexpected interest-rate hikes. Don’t plan on fixing your home loan rate for just 2 years as it will not give you protection from interest rate hikes. Therefore, lock your loan for a term of 3-5 years in order for you to get the maximum interest rate protection for a fixed-rate loan. Also, never exceed for 5 years as it will only restrict the flexibility of your home loan.

Know When Not To Fix Your Home Loan

The decrease of mortgage rates can cause your current rate to locked up until your fixed-rate term ends. This means that you will not be able to take advantage of the lower interest rates.
If you don’t want to be locked in with a specific lender or loan, don’t settle to fix your home loan as it will cause you a high amount of exit fees.
You won’t be able to make huge extra repayments when you fix your home loan. Paying your debt during your fixed-rate term will cause you to pay break costs or exit fees. So, before fixing your home loan, you must first ask your lender if they offer a flexible fixed rate option to avoid extra charges in the future.
Refinancing your home loan is not a good idea if you are in a fixed-rate term as this will negatively affect your budget.

You May Opt To Fix Just A Portion Of Your Loan

You can just go for a split loan if you want to have both the stability of a fixed rate and the flexibility of a variable rate.

The part of your loan that is fixed will still be protected from sudden interest rate hikes and on the other hand, the variable part of your loan enables you to make unrestricted repayments.


Having a plan of fixing your home loan now will enable yourself to be protected from sudden rate hikes from the Reserve Bank Of Australia or some others from your bank that might happen within your fixed term.

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