Fixed Rate Mortgage Loans Advantages & Disadvantages

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Kimberly AshThroughout the past few years, home loan interest rates have remained relatively low. As the 2016/2017 fiscal year wraps up, the Reserve Bank of Australia has decided to keep the official cash rate at a steady 1.50%. In recent months there have been a lot of speculations from economists that this trend may continue for some time and even into 2018. This however, has left many home buyers undecided on whether to fix their home loans or not with some banks having begun reducing their interest rates while others have stopped hiking the fixed rate home loans.What is a fixed rate home loan?A fixed rate mortgage loan (FRM), is a full mortgage loan where the interest rate remains the same throughout the repayment period, as opposed to the variable mortgage loan where the interest may vary and either go up or down during the loan term.Advantages of fixing your home loanThe main advantage of a fixed rate home loan is the certainty that comes with it. Opting for a fixed rate ensures you pay a certain amount for a set period of time. This not only helps a home buyer to plan his finances well into the future, but it also ensures ones budget is not disrupted by the market trends. A good option for individuals or families who are working with a certain budget with little room for changes.The rates have remained low for some time now, however if the RBA were to decide to raise the rates in the near future, having fixed your home loan will cushion you from paying higher interest rates while those with variable interest rates may be swept into paying a never ending debt.DisadvantagesShould the Reserve Bank of Australia decide to cut down the cash rate, you will not benefit from the falling interest rates. You may end up missing out on low repayments that those with variable rates enjoy. Depending on the lender you choose, you may be limited in other areas like having no ability to make additional repayments.Fixing your home loan can be a great option, however if you are unsure of what the future market holds, you may opt to split your home loan, fix only part of the loan and this way you can have the best of both worlds variable and fixed.While a fixed rate home loan has numerous advantages and disadvantages, when it’s time to compare home loans and make a decision on which way to go, your decision should factor in your financial goals and current situation.Kimberley Ash is an expert property adviser and professional in Australia. The author loves to share her experience on the topics like home loan interest rates, lowest fixed rate home loans, types of home loans, big lenders, how to get loans approved, etc. so that latest property and home loan updates can be made available for the buyers before making any deal.

Kimberley A is an expert property adviser and professional from North Sydney, Australia. The author loves to share her experience on the topics like home loans,

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5 year fixed rate home loans

, types of home loans, big lenders, how to get loans approved, etc. so that latest property and home loan updates can be made available for the buyers before making any deal.

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