When it comes to choosing a home loan, it’s important to understand the different loan products and interest rate options available. Each comes with its own set of advantages and limitations, and the most suitable option will depend on your financial situation and future goals. An experienced mortgage broker can guide you through the process and help you make an informed decision.
A fixed interest rate home loan offers the certainty of locked-in repayments for a set period—typically 1 to 3 years, though terms of up to 10 years are available. While longer fixed terms may offer stability, they’re often less cost-effective.
You may also consider a rate lock—a feature that secures your fixed interest rate from application to settlement. This can incur an additional cost, either as a flat fee or a percentage of your loan, depending on the lender. Without a rate lock, any rate increase before settlement may affect your loan.
Once the fixed period ends, the loan automatically reverts to the lender’s standard variable rate—unless you or your broker arrange to refinance or re-fix beforehand. A proactive mortgage broker will usually reach out well in advance to review your options.
Variable rate loans offer flexibility, with interest rates that may rise or fall over the life of the loan. This means your repayments could change over time, depending on market conditions.
While your rate at settlement may differ from when you applied, variable loans often come with more features that allow you to manage your loan more actively.
A split rate loan offers the best of both worlds—part of your loan is on a fixed rate, and the remainder is on a variable rate. This option provides repayment certainty on one portion, while allowing flexibility and extra repayments on the other.
There’s no fixed rule for how you split the loan—common options include a 50/50 or 80/20 structure. Your mortgage broker can help determine the best ratio based on your income, goals, and financial position.
No one can predict where interest rates will head next. That’s why working with a knowledgeable mortgage broker is key to finding the right loan structure for your circumstances. At Self Employed Finance, we take the time to understand your needs and guide you toward a solution that offers the right mix of features, flexibility, and affordability.