With interest rates at an all-time low, taking the option of locking in an interest rate on your home loan to guard against possible future fluctuations may be attractive. However, it pays to know the ins and outs of fixed-rate loans before committing to one.

When purchasing a property or refinancing your mortgage, borrowers can decide between fixed-interest loans that maintain the same interest rate over a specific period of time, or variable-rate loans that will charge interest according to market rate fluctuations.

Fixed-rate loans usually come with a few conditions: borrowers may be restricted to maximum payments during the fixed term and can face hefty break fees for paying off the loan early.

All in all, locking in the interest rate on your home loan can offer stability particularly if you are conscious of a budget and want to take a medium-to-long term position on a fixed rate to protect yourself from the volatility of potential rate movements.

Fixed rates are locked in for an amount of time that is prearranged between you and your lender. You can fix your loan for seven-year or ten-year fixed terms, but generally two or three-year terms are the most popular options because a lot can change in more than 3 years’ time.

Further to this, fixed-rate loans can also be pre-approved. This means that you can apply for the fixed-rate loan before you find the property you want to buy. When applying for a fixed rate, at the point of application you can pay a fixed rate lock-in fee which will, depending on the lender, give you between 60 and 90 days from the time of application to settle the loan at that fixed rate. Alternatively, you can choose to lock the rate in at the time of actual approval.

In summary, if you are looking for some certainty to more accurately budget for other lifestyle expenses or savings goals, fixing your loan might be an option for you!

Get in touch with us today so we can talk through your options and help you find the most suitable loan to save you time and money.