Ensuring Financial Confidence: A Guide to Fixing Your Home Loan 

Deciding whether to fix your home loan or opt for a variable rate can be a complex decision. Explore the nuances of fixed-rate home loans to make informed choices aligned with your short-term and long-term financial goals. 

Fixed vs Variable: A Constant Dilemma: 

“Fixed or variable” is a common question, and the answer isn’t straightforward. Future interest rates are unpredictable, making the choice between fixed and variable rates dependent on your unique financial plans. 

How to Fix Your Home Loan: 

Contact most lenders by phone to fix your interest rate conveniently. However, it’s crucial to understand the implications of a fixed rate, as it operates differently than a variable rate. 

When Fixing Is a Bad Idea: 

Avoid fixing your loan if: 

• You plan on making substantial extra repayments. 
• Selling your property is part of your short-term plan. 
• Refinancing or changing loan types is on the horizon. 
• Renovations or building a new home using equity are in your future plans. 
• You prefer flexibility and dislike being tied to a specific lender or loan product. 

Restrictions on Fixed Rate Loans: 

Fixed-rate loans come with limitations, such as: 

• Limited extra repayments, often capped at around $10,000 p.a. 
• Inability to link an offset account to the loan. 
• Restricted access to redraw any additional payments made. 
• Potential for significant exit fees for actions like extra repayments, refinancing, or selling the property. 

While some lenders offer flexibility with fixed-rate loans, it’s essential to choose the right product that aligns with your financial goals. 

Understanding Break Fees: 

Break fees, also known as early repayment adjustments, can be substantial, sometimes exceeding $10,000 or even $100,000. Some lenders allow splitting the loan, fixing a portion, and keeping part variable for added flexibility. 

Considering a Change of Banks: 

Banks compete fiercely on fixed interest rates, often offering specials on 3-year and 5-year fixed rate loans. If your bank doesn’t match competitive rates, it might be worthwhile to refinance. Be mindful of professional discounts that may not be advertised but can be negotiated. 

Calculating Your Fixed Portion: 

Estimate the amount you intend to pay off during the fixed rate term and keep that portion variable. This strategy allows extra repayments on the variable rate without incurring break fees. 

Determining the Fixed Term Duration: 

The length of the fixed term impacts the premium paid for a fixed interest rate. Common terms include 3 and 5 years, with banks frequently offering specials for these durations. Consider your expectations for future interest rates and personal needs when choosing between fixed and variable. 

Rate Lock Considerations: 

For new loans or refinancing, consider rate-locking your loan during the application process to secure the interest rate at the time of application, not settlement. While some lenders offer free rate locks, careful attention to details is crucial to avoid potential pitfalls. 

Note: This information is general, and seeking advice from financial professionals is recommended before making home loan decisions.