Fixed Rate Loans – Advantage
- Interest rates are fixed. Therefore, when the market rate rises, you won’t be charged extra.
- You can set the conditions of the loan, i.e.- the time period which is generally available from 6 months to up to 5 years.
- You will predict the loan repayment you have to pay over the time period, independent of market changes.
- If your financial condition changes, and you want to complete the loan early, then additional fees will apply.
- During this time period, you may have to pay more than if you had chosen a variable rate plan, even if the market was on the rise.
- Not much flexible as a variable rate. You can’t repay any additional amount and redraw.
Variable Rate Loans – Advantage
- Your interest rate will fall when the market value falls.
- Provides you with plenty of flexibility and allows you to repay unlimited additional amounts.
- On average, the variable interest rate is lower than a fixed rate.
- Provides you with additional features. Some agencies have low introductory, also known as, “honeymoon rates” for a certain period of time before shifting to the usual rate.
- Your interest rate will increase when market value increases and you are expected to make additional payments
- If market value increases rapidly, then you have to repay a greater amount compared to that if you had chosen a fixed interest plan over the same time period.
- If you borrow money close to your repayment capacity, it might be risky if the interest rate increases.
- Becomes risky in a rising interest market if you have gone beyond your loan capacity.
Are Split Rate Loans the best for you?
As Split Rate loans allow you to cut your loan amount into 2 separate portions of variable and fixed rates, adjusting to your economic condition, it is usually the best suit for someone who is thinking of buying a new home. In summary, split-rate loans are best for people who:
- Need some security.
- Wants to pay their loan early.
- Looking to buy a new home.
All these decisions are really hard, especially, if you haven’t taken a mortgage loan before.
Our?mortgage brokers?are expert on finding suitable loan products depending on the financial condition of the buyers.?
