Whether it's you first home, your family home or an investment property, one of the key choices you'll need to make is whether you go for a fixed or variable home loan. While you might have a loose idea what each of these terms mean, choosing a fixed or variable interest rate can provide different features and conditions that can greatly impact the way you pay and manage your loan down the track.
What is a fixed rate loan?
A fixed rate loan is the ability to lock in a rate for a fixed period. The timeframe can vary between lenders, but usually sits between 1 and 5 years. The key advantages of a fixed rate home loan are:
- The ability to lock in a set rate and know exactly what your repayments will be
- Peace of mind if rates are on the rise
- The ability to plan and budget
When choosing a fixed rate home loan, there are also a number of considerations to take into account that can vary between lenders including:
- Limits on how much you can make in additional repayments
- Inability to redraw money you've contributed to your loan over and above your minimum repayments
- No offset account feature, which can reduce the interest you pay off your home loan
- The possibility of missing out on lower interest rates over the fixed term if market rates drop
With an Auswide Bank fixed rate home loan, we have the ability to offer our customers features that would not normally be provided if you were to go with one of the big banks. Being a small bank our fixed rate customers can enjoy some of the benefits of a variable loan such as:
- The ability to redraw any extra money you've paid towards your home loan~ (such as unexpected expenses, a holiday or a home renovation).
- An optional mortgage offset account which provides a 100% interest offset benefit so you can pay off your home loan earlier
Learn more about our Home Loan Plus Freedom Package
What is a variable rate loan?
A variable rate loan will have an interest rate that fluctuates based on the market rates set by the Reserve Bank of Australia (RBA). Unlike a fixed rate loan, the interest rates on a variable rate loan may vary each month meaning your repayments vary as well. The key advantages of a variable rate home loan are:
- Lower repayments when interest rates are low or about to fall
- Added features as part of your loan including the ability to redraw any additional repayments and an offset account
The difficulties with opting for a variable rate loan typically include:
- Higher repayments when interest rates rise
- Cash flow uncertainty making it harder to plan and budget
An Auswide Bank home loan with a variable rate provides a number of smart features for you to take advantage of such as:
- No penalties for extra repayments to your home loan allowing you to pay it off faster
- Ability to repay weekly, fortnightly or monthly
- Ability to redraw any extra money you've paid towards your loan~
- Option of a mortgage offset account which provides a 100% interest offset benefit so you can pay off your home loan earlier
Learn more about Auswide Bank home loans
Whether it's face-to-face or over-the-phone, book an appointment with one of our home loan lending consultants who can answer your questions and provide you with expert help for your home buying journey.
Auswide Bank Ltd ABN 40 087 652 060, Australian Credit Licence 239686 is the credit issuer. This is not an offer to lend - approval is subject to credit assessment criteria. Terms, conditions, fees & charges apply - full details on application. Prior to entering into a credit contract with us you should read our Credit Guide. This information provides general advice only. We do not provide advice about this product based on any consideration of your personal objectives, needs or circumstances. ~Redraw is subject to Auswide Bank's discretion – limits may apply.
