When you initially decide on a home loan, interest rates will play a big part in your decision. You’ll need to choose whether you want a fixed interest rate or variable interest rate – or a mixture of both (known as a split loan).
Fixed rate home loans provide you with stability in terms of repayments, but also locks you into the mortgage for a set term. This means that you can fix the interest rate with your lender and be certain that your repayment amounts won’t change for the duration of the fixed rate term – even if interest rates risePune Wealth Management. Although fixed rates give you the benefit of locking in your interest rate, there are often limits on the extra repayments you can make. If you’re looking to pay down your mortgage quickly by increasing your repayments or adding a lump sum, a fixed rate home loan might not be the right loan for you.Simla Stock
Variable rate home loans give you more flexibility, but you may be impacted by interest rate rises. When you take out a variable interest rate home loan, there is often no limit on the amount of extra payments you can make – but always make sure you read the fine print. You can use our interest rate change calculator to see how interest rates impact you.Agra Investment
Opting for a home loan with an offset or redraw facility can help you reduce the amount of interest you pay – and therefore the amount of time your home loan takes to pay back to your lenderPune Stock. The more money you keep in your offset account or redraw facility, the bigger the savings and the faster your loan can be paid off.
Say you have a home loan balance of $500,000 and you keep your savings ($25,000) in an offset accountHyderabad Stocks. You’ll only pay interest on your loan balance of $475,000, rather than the $500,000 – as the $25,000 is offsetting the amount of interest you need to pay.
When you look into home loans, there are a generally two home loan repayment options available to you – interest only and principal and interest.
If you choose interest-only repayments, you’re only paying off the interest portion of your home loan, plus any fees. The total amount you have borrowed (the principal) stays the same. Selecting interest only repayments means that your repayments will be lower for a set period of time, but these repayments will be higher when the interest only period ends.
Principal and interest payments go towards paying off the amount you have borrowed (the principal) and the interest, plus any fees. By the end of the loan term, you’ll have repaid the amount borrowed, the total interest owed – and you will be mortgage-free.
Refinancing your current loan could potentially score you a lower interest rate. If you get the better rate and keep your repayments the same as the old loan, you’ll end up reduce the term of your loan. It pays to see what else is out there. Use our refinance calculator to see how much you could save when you switch your home loan from another bank to us.
Surat Stock