A fixed term home loan has, as indicated, a pre-determined, set in mortar, interest rate for a set, agreed upon, period of time. Fixed interest home loans provide you with the security of knowing exactly what your repayments will be for the duration of your mortgage agreement.
As with any loan, you are able to change, with approval, to a traditional variable interest rate loan, split loan or one of a range of other options should your circumstances change or if you feel another option would serve you better.
A split interest loan allows you to borrow under a divided home loan rate, encompassing a variable home loan component, which fluctuates according to the interest rates of the day, and a fixed interest rate home loan component.
Other options that may suit your needs include non-conforming loans, for the self-employed, contractors and anyone who does not have a standard wage or salary, and reverse mortgage loans, an ideal source of financial credit for the over 60s.
The key advantage with fixed interest loans is your ability to budget accurately each month and to know exactly where you stand as the loan is not affected by the vagaries of the finance and interest rate market.
The key disadvantage is that, while your interest rate is lower during high interest periods, it can be higher during lower interest periods, than for those on a variable rate agreement. In addition, most lending institutions penalise borrowers for making additional repayments, effectively canceling out your ability to pay your loan out sooner, with the potential of being penalised if you pay your house loan off before the agreed due date of your loan term.
Naturally, you need to work out which options suit your unique circumstances the best. As one of the leading mortgage brokers located in Australia, Origin Finance handle hundreds of loans offered by a choice of 30 banks and lending institutions, and are in an ideal position to advise you on fixed interest home loans or any of the broad range of home and investment loans available.