When clients talk to us about home loans in our Rockingham office, we always get around to the subject of whether a fixed rate mortgage or a variable rate mortgage is appropriate. With record low interest rates, 2014 has been a pretty easy year for making the decision: get a low fixed rate now because they probably aren’t going any lower.

However, it isn’t always easy, even with low interest rates. There are more factors at work when deciding whether to have a fixed or variable rate loan or mixing the two. Here are the pros and cons of a fixed home loan.

Advantages to Fixed Rate Home Loans

Usually, your fixed rate home loan will be fixed over a period of one, three or five years. One of the best advantages to a fixed rate is that you can budget for it easier because it is always the same for the term in which it is fixed. Most of all, when rates rise, you don’t have to worry because you are paying a fixed rate.

As we mentioned, fixing a record-low rate can save you a lot of money.

Disadvantages to Fixed Rate Home Loans

However, there are some disadvantages to a fixed rate home loan. The biggest disadvantage is that you can’t deviate from anything without it costing you money. If you want to pay off the loan early because you are selling the home, you will have to pay a fee. If you want to make extra payments, they will often charge you a fee that negates any advantage you may have obtained from paying more off of the principal.

Also, when rates drop, it tends to irritate people who are in the middle of a fixed rate loan.

Talk to the Professionals at Smartline Rockingham

Call a mortgage broker at Smartline Rockingham the next time you need a home loan: (08) 9527 1800.