A fixed home loan has a set interest rate over a set period of time- the home loan rate that will not change during the fixed period. Home loans generally have a fixed or variable interest rate, or a mixture of both called a split rate. At the end of the set period, the fixed home loan will expire and you can choose to fix the rate again, or switch to a variable interest rate which fluctuates with the market.

Choosing between a fixed home loan and a variable home loan is an important decision when taking out a home loan on a residential or investment property. It is important to consider some of these points when making a decision.

Why a fixed home loan?

· If variable interest rates rise, a borrower’s fixed interest rate will remain unchanged.

· Fixed home loans are good if the borrower wants to carefully budget the repayment, knowing how much to pay means you can plan accordingly and gives you a degree of certainty.

When to take out a fixed home loan?

Generally borrowers who look to a fixed home loan are insulating their interest rate, mortgage repayments and themselves from possible future events.

For example,

· A potential job loss or maternity leave, where the borrower has a buffer in place to maintain home loan repayments.

· Upcoming costs, such as children’s daycare, schools or an upcoming event that may impact the family budget.

· Property renovations and repairs which could arise in the near future.

What to consider in a fixed home loan?

· Some fixed home loans charge you for making early repayments. As a penalty you may have to either pay a fee or keep the loan for the original fixed term and pay the full interest amount. 

· Restrictions on extra repayments and early payout to some fixed rate loans can prevent you paying off your loan as quick as you might like, but a fixed rate home loan will give you a degree of certainty.

· Also carefully consider the term of the loan which varies between one and five years, the most popular being three years. It depends on the current economic environment and the borrower’s specific situation.

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> To find out more about Resi's fixed rates contact your nearest Resi branch.