| Fixed
Rate (Principal and Interest) home loans
A fixed rate loan is a loan that has a fixed interest
rate and therefore fixed loan repayments. The time period
of these loans can vary, but you can usually “lock
in” your repayments for between 1-5 years. Although
the fixed rate period may be 3 years, the total length
of the loan itself may be 25 or 30 years. At the end
of the fixed loan period you can decide whether to fix
the loan again for another period of time at the current
market rates or convert the loan to a variable interest
rate for the remaining time left of the loan.
Pros:
Repayments
do not rise if the official interest rate rises
Provides peace of mind for borrowers concerned about
rate rises
Allows more precise budgeting
Cons:
Repayments
do not fall if rates fall
Allows only limited additional payments
Penalises early payout of the loan
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