You can place some of your loan on a fixed rate and some on a floating rate, the difference between the products are as follows.
Fixed Home Loan
You can not make lump sum repayments without a possible break fee. If you make a lump sum repayments you can not redraw the funds you have paid. Your rate and repayments stay the same for the term you choose. You can refix after the term you choose.
Floating Home Loan
You can make lump sum repayments. You can not redraw any extra amounts you have paid. Your rate and repayments can change.
Revolving Credit
You can make lump sum repayments. You can redraw any lump sums you pay of the balance. You rate and repayments can change.
Capped rate
You can make lump sum repayments. You can not redraw any lump sums you have paid. You rate and repayments can go down but can not go up past an agreed point for the term you choose. (this product is not available through many banks)
Further info
Once any part of your home balance is on a fixed term for a fixed interest rate, it becomes less flexible. Paying off any of this balance during its fixed term can sometimes cost you a fee, known as a break cost. This fee can vary from a few hundred to a few thousand dollars, depending on the market conditions. It is basically the bank’s attempt to recover its costs, and generally if interest rates go down and you are fixed at a higher rate you can expect a cost.
Predicting what the interest rate will be in the future, can be close to impossible, and even the experts frequently get it wrong. It is best to focus on what your situation is now and what it may be in the near future. For example, do you like the idea of knowing what your repayments will be for the next three years so that you can budget with certainty? Do you think you may be getting a large bonus and will want to repay a lump sum in six months?.
Please note that a mortgagesonline broker can discuss the above options with you in more detail and assist you to make the right decisions. |
