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Which Home Loan Type Is Right For You?

Do you need clarification about the differences between fixed and variable-rate home loans? Working with a home loan broker is a great way to determine which type of loan is best for your situation.

Here, we will explore the advantages and disadvantages of fixed and variable-rate home loans so that you can make an informed decision about financing your dream home.

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What Are Fixed And Variable-rate Home Loans?

As a home loan broker, I frequently get asked about the difference between fixed and variable-rate home loans. Put, a fixed-rate home loan means that your interest rate will remain the same for the entire term of your loan, while a variable-rate home loan means that your interest rate will fluctuate according to the market.

With a fixed-rate home loan, you have the peace of mind of knowing exactly what your mortgage repayments will be for your loan term. It can be particularly appealing if you are on a tight budget or are concerned about the potential impact of interest rate rises. However, it’s important to note that fixed-rate loans often have fewer features and may restrict extra repayments and redraws.

On the other hand, a variable-rate home loan can offer more flexibility and potentially lower repayments in the short term, as your interest rate can be adjusted downwards if market conditions are favourable. However, there is also the risk that your interest rate could rise, making your repayments more challenging to manage.

Ultimately, whether a fixed or variable-rate home loan is right for you depends on your circumstances and financial goals. As a home loan broker, I always recommend doing your research and seeking expert advice before making any significant financial decisions.

Pros And Cons Of Fixed-rate Home Loans

Fixed-rate home loans offer borrowers a stable interest rate for a set period. Here are the pros and cons of choosing a fixed-rate home loan:
Predictability
With a fixed-rate home loan, borrowers know precisely their monthly mortgage payments, making budgeting and financial planning easier.
Protection from interest rate increases
If interest rates rise, a fixed-rate home loan will remain at the same rate, protecting potentially higher mortgage payments.
Easier to understand
Fixed-rate home loans are straightforward, making them a popular choice for first-time homebuyers.
Lack of flexibility
Fixed-rate home loans often have restrictions, such as the limited ability to make extra repayments or refinance without penalty.
Higher initial interest rates
Fixed-rate home loans often have higher interest rates than variable-rate home loans, which can mean paying more in interest over the life of the loan.
Missing out on potential savings
Overall, fixed-rate home loans offer stability and predictability, making them a good choice for borrowers who want to know exactly what their monthly mortgage payments will be.
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Pros And Cons Of Variable Rate Home Loans

Variable rate home loans, also known as adjustable rate mortgages (ARMs), are home loans where the interest rate can fluctuate over time. Here are some of the pros and cons of choosing a variable-rate home loan:
Variable-rate home loans typically start with lower interest rates than fixed-rate home loans. This can make them more affordable in the short term.
If interest rates decrease, your monthly mortgage payments could also reduce. This could save you thousands of dollars in the long run.
Variable-rate home loans often come with more flexible terms, such as the ability to make extra payments without penalties.
The most significant disadvantage of a variable-rate home loan is the uncertainty of fluctuating interest rates. It can be challenging to plan for your monthly mortgage payments when you need to know how much they’ll be from month to month.
If interest rates increase, your monthly mortgage payments could also increase. This could make your monthly payments unaffordable.
A variable-rate home loan may not be your best option if you prefer a predictable payment amount. Overall, variable-rate home loans can be a good choice if you’re comfortable with some uncertainty and can handle potential rate increases. It’s essential to consider your long-term financial goals and current financial situation when deciding between fixed and variable-rate home loans. A home loan broker can help you evaluate your options and choose the best type of loan for your needs.

Factors To Consider When Choosing Between Fixed And Variable-rate Home Loans

When deciding between fixed and variable-rate home loans, it’s important to consider the following factors:
Interest Rates
You need to analyze your ability to repay loans based on interest rates. Fixed-rate loans provide security and stability in knowing your interest rates will remain the same, whereas variable-rate loans are more flexible and fluctuate with market conditions.
Market conditions
If the economy is doing well and interest rates are low, you may benefit from a variable-rate loan, while fixed-rate loans might cost you more.
Risk tolerance
Fixed-rate loans provide stability in the long term but can cost you more in a short time. On the other hand, variable-rate loans come with the risk of rates rising, which could lead to an increase in your monthly payments.
Loan terms
The loan length will also determine the type of loan that suits you. Choose a fixed rate for a shorter loan, while a more extended loan might benefit from a variable rate, as interest rates could decrease over time.
Personal goals
Consider what you want to achieve with your home loan. Are you looking to pay it off quickly? Are you comfortable with fluctuations in your repayments? This will determine the best type of loan to suit your needs.
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Adam Smith
Adam Smith
December 3, 2023
I initially engaged Spiro (What if we Finance) back in Sept-22 when I was first looking into possibilities of buying a property. As part of my due diligence I met with several well reviewed Mortgage Brokers at the time, however, not one of them were as clear at walking me through the process and clarifying my personal borrowing power vs buying objectives as much as Spiro did. I knew after the initial discussion that he was “the one” and based on our chat he made it clear that in order to meet my borrowing objectives my deposit may be a limiting factor. Well, one year later and with a bigger deposit, I got back in contact in order to officially start the process. Impressively, Spiro remembered me and we continued our discussion by going through everything in detail once again based on current market conditions. His process and tools made the entire process smooth, stress free and easy to understand, and I felt very confident knowing Spiro was my trusted advisor and would be able to handle any issues which may arise. This was especially reassuring considering the many other challenges one needs to face when searching for and buying a property. Overall, I have no hesitation in recommending Spiro and would definitely use him again when buying our next property. If anyone is out there sifting through the thousands of mortgage brokers, I suggest you add “What If We Finance” to your shortlist and book in a chat with Spiro.
Catherine Serpell
Catherine Serpell
November 17, 2023
My partner and I have had a great experience with Spiro! From start to finish, Spiro guided us through the process seamlessly, ensuring a smooth experience. We've really appreciated his reliability and patience in answering all our questions. We highly recommend Spiro to anyone seeking a trustworthy mortgage broker.
Evan Pash
Evan Pash
November 17, 2023
I recently had the pleasure of working with Spiro and his team and cannot express how satisfied I am with the exceptional service provided. From the initial consultation to the closing of my mortgage, the experience was nothing short of outstanding. Spiro demonstrated an impressive level of expertise and professionalism throughout the entire process. They were attentive to my specific financial needs and took the time to explain complex mortgage terms in a way that was easy to understand. The personalised approach made me feel confident and well-informed at every step.
Lucas Hunter
Lucas Hunter
November 14, 2023
Great service from Spiro and the team, assisting us at every turn to find our first home and organise our loan. Very knowledgeable and fast turnaround, thank you!
Burak Guven
Burak Guven
November 7, 2023
Amazing service. Entire process was seamless. Couldn’t be happier with the outcome of my loan application. Spiro is an absolute expert at what he does.
Wesley Loh
Wesley Loh
October 12, 2023
Sprio came to the rescue after an Aussie Home Loans broker put our purchase in jeopardy through his shocking negligence (convinced us of a loan product and its preapproval, only to learn that the product had a loan limit he was unaware of). Not only did Spiro find another product that fit, he successfully negotiated a lower rate for us. To get us over the line, Spiro worked night and day (we got emails at 5am, and he was available on phone and video call late into the night whenever we needed him), and even put in hard hours on AFL Grand Final weekend. The biggest compliment I can give is that Spiro always had things under control and made us feel like we were in safe hands. His expert knowledge combined with his incredible level of ownership gave us peace of mind in a stressful and time-sensitive situation. Thanks for your hard work and dedication, Spiro. We're so grateful that we found you.
Olivia Simpkin
Olivia Simpkin
October 12, 2023
I could not recommend Spiro and his team highly enough. Our experience has been wonderful from start to finish. We actually had a broker when we started the purchase of our new home, but he made a very large mistake that put us and our offer in jeopardy. We quickly moved to Spiro to see if he could help and he was able to turn everything around and fix the problem without hesitation. His knowledge and experience as a broker is exactly what you need when you are going through the stressful experience of purchasing your first home. He always answered the thousands of questions we threw his way, and he worked all hours of the day (even going so far as working on public holidays, when he was ill, and when his loved one was ill) just to ensure our deal went through. Regardless of what issues appeared (and with the banks behaving so poorly there were a few out of our control), he worked tirelessly behind the scenes to smooth everything out. He was also always very open with his communication, explaining all the broker jargon to help my understanding, and updating us consistently on how matters were going so we never felt blind. Thank you Spiro for all your help, we couldn't have done it without you.
Tony Wood
Tony Wood
October 9, 2023
Spiro & the What If We Finance team are experts in all aspects of lending from Purchase/Refinance of Owner-Occupied properties through to Investment & Self-Employed Lending.
Brittany Olver
Brittany Olver
September 21, 2023
Our experience with What If We Finance could not have been more positive. Spiro took the time to listen to our goals, offer sound and clear advice, whilst also answering our questions in an extremely professional and timely manner. Most importantly though, Spiro got the job done. Having had disappointing experiences with other brokers, we were left feeling as if maybe purchasing a property was out of our reach. Spiro however, provided us with a breath of fresh air, through his positivity and pro-active approach. Now, my fiance' and I are the happy owners of our new home and incredibly excited to build our future here. We have Spiro and the team at What If We Finance to thank for that!
Steven Frantzis
Steven Frantzis
September 9, 2023
Grateful of the service provided by Spiro and the team at What If We Finance. Clear example of expertise, highly recommend!