Are you in the process of buying property or refinancing your mortgage?
Deciding on the best mortgage rate can sometimes be a difficult process. Especially when you're doing it on your own. Whether you're looking at securing a fixed rate or a variable rate, each offer their own unique conditions and advantages. Though, it's best to know which one is most suitable for you.
Real Estate Investment Finance is comprised of a national team of mortgage brokers who will help you to determine the best rate - for you! We will analyse your finances and circumstances to gain a better understanding of which kind of interest rate will help you to pay off your home loan faster. Because, let's face it - no one actually wants to spend 30 years paying off a loan.
In this article, we're going to explain the different kinds of mortgage interest rates available to you as a property owner. This will hopefully give you a better understanding on what is more suited to your circumstances.
Fixed rate
Fixed rate loans are the kind you set and forget. It's when the interest rate that's charged on the loan is fixed for the entire term of the loan and therefore, is unaffected by the changing market. In other words, if the Reserve Bank of Australia decides to increase it's cash rate, your interest rate will remain unaffected during the period in which you're locked in for.
Fixed rates can last up to five years. When you're mortgage is set to a fixed rate you can choose to make either; weekly, fortnightly or monthly repayments. The value of these repayments will remain the same for the entire course of the loan contract.
Benefits
The major benefit of fixed rates is that it's easier to budget as you know what your repayments will be during the course of your loan contract. Another benefit is that this kind of mortgage rate it generally costs less as their are fewer loan features.
Disadvantages
The greatest disadvantage of choosing a fixed rate is that because you are locked in, you don't necessarily benefit if interest rates decrease. You can also be disadvantaged if you choose to break out of the contract due to being required to pay break cost fees.
Variable rates
If you have a mortgage on your property, you can choose to pay your loan off with a variable rate. This interest rate is subject to change, depending on the market. For instance, when the Reserve Bank sets it's official cash rate at the beginning of each month, your repayments is dependant on the market's variable rate. If you choose a variable rate, you're most likely to pay off your home loan quicker.
Benefits
The biggest benefit of selecting this kind of rate when you're searching for the best mortgage interest rates is that it generally includes more features. As a consumer, this offers you greater flexibility. Another benefit is that it becomes easier to switch interest rates later if you find a better deal. This is because you do not have to pay to break out of the loan contract.
Disadvantages
Whilst we outlined that a benefit of this kind of rate is that there are more features, you do have to pay extra for them. This can be a disadvantage to those who are more budget conscious. Another disadvantage for the budget conscious mortgage consumer is that due to change in market trends - your repayments are subject to change and you could be expected to pay more depending on the overall cash rate.
Fixed + Variable Rates
What if we told you that you can choose to split your home loan?
With a split rate loan you can choose to divide your home loan into two separate loans. Even better, you can nominate which proportion of the loan you wish to fix and which you wish to remain variable. This gives you the certainty of a fixed rate with the flexibility to make extra repayments on the variable aspect.
Finding the most suitable home loan rates for you!
In this video, our CEO and Founder, David Chehade, explains the difference between a fixed and variable interest rate
REIF are here to make the process of choosing the most suitable home loan rates, as seamless as possible. If you're unsure of which home loan rates are suited to you and your circumstances, we can assist you.
To learn more about how we can assist you with making the most out of your mortgage repayments, please reach out to our team of specialists on the details provided below. We would love to be able to assist you with making the right decision.
Ph: 1300 130 932
Email: clientservices@reif.com.au
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