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Fixed vs Variable Interest Rates

To fix or not to fix, that is the question!!

A fixed rate loan offers certainty and a sense of comfort if you wish to carefully budget repayments in line with all your other monthly outgoings. Most lenders these days will allow limited extra repayments on a fixed rate loan but you must keep in mind that to break the fixed rate period may incur substantial fees.

Variable rate home loans traditionally provide much more flexibility and offer more options than fixed rates. Of prime importance when taking out a variable rate loan is to make sure that when you do your budget you factor in any interest rate rises that may occur. You should always feel confident that you can meet your repayment obligations should rates increase.

You can hedge your bets by taking out a split on your loan between a variable and a fixed rate. This can be in any proportion you may feel comfortable with. This will give you some comfort with the fixed rate portion and also the flexibility to pay off the variable rate portion ahead of time.

At the end of the day it is up to you. Your decision to fix or go variable or a split will need to take into account your personal financial goals, your income stability and your perceived need for security or flexibility.

Home Loan Solutions offer Mortgage Broking Advice under Finance Brokers License No 2436.

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