Variable Interest Rate Loan
The first consideration when it comes to comparing home loans would be considering which sort of interest you would love to go for. The more popular choice is varying rates that are determined by your creditor and might change at any moment. Frequently lenders will shift their varying rates because of the Reserve Bank of Australia altering the official cash rate. When rates are low, you will benefit, but you are also vulnerable to rate increases.
It’s essential when you are going to go for a variable rate mortgage, to figure out if you can reasonably afford a rate increase by punching in your details into an interest rate change calculator.
Fixed Interest Rate Loan
The biggest drawcard of selecting a fixed rate loan is the payments will remain consistent throughout the fixed term, making this sort of home loan popular for first home buyers or people on a strict budget.
However, fixed rates are usually higher than variable rates, and you will find it more challenging to change home loans, as some suppliers charge an exit fee if you attempt to refinance during the fixed rate period. You will also lose out on some flexible features like a 100% offset account, but the great thing is nowadays many fixed rate loans include an additional repayments facility.
Another thing you’ll have to bear in mind is that the longer the fixed rate term, the higher the rate of interest.