1 Year Fixed Mortgages
Many borrowers opt to lock-in an interest rate for a certain period of time, such as one year, if a rate rise has been forecast. By doing so they can continue making repayments at the lower rate of interest for an agreed period and potentially save hundreds of dollars, depending on the size of the loan and length of the fixed period.
Others simply prefer the stability that set-repayments bring.
This may be particularly true for first home buyers, which can often struggle to adjust to a new mortgage, and benefit from having a strict repayment schedule that is typical of a 1 year fixed mortgage.
The downside to fixed rates is that you could potentially miss out on money-saving opportunities associated with variable rate cuts.
After the 1 year fixed period matures, the mortgage reverts to a standard variable interest rate. The borrower may also choose to lock in for another period. However, some lenders do charge a fee for this privilege so it’s best to read the Product Disclosure Statement before you sign.
Whether you choose to fix your rate for a period or opt for a variable rate home loan, it pays to compare mortgage options as most vary drastically on features and costs.
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Monthly repayments are based on advertised rate, loan amount and selected payment frequency over 25 years.
The comparison rate is based on secured credit of $150,000 and a term of 25 years. WARNING: The comparison rate applies only to the example given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan.
Consider whether this general financial advice is right for your personal circumstances. You may need financial advice from a qualified adviser. Read our detailed disclosure here.
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