Choosing the right home loan is one of the biggest financial decisions you’ll make. One key consideration is whether to opt for a fixed or variable interest rate.
Each option has its pros and cons, and choosing the right one depends on your financial goals and personal circumstances.
Fixed Rate Loans
A fixed-rate home loan offers certainty and stability by locking in your interest rate for a set period, typically between one to five years. Some lenders may charge you a fee to lock-in the rate.
Benefits:
- Predictable repayments – Your monthly repayments remain the same, making budgeting easier.
- Protection against rate increases – If interest rates rise, your repayments won’t be affected.
- Good for long-term planners – Ideal if you prefer stability over market fluctuations.
Downsides:
- Limited flexibility – Often, you can’t make extra repayments without penalty, or the amount permitted is capped. You may not be able to redraw on the loan or have an offset account.
- Potentially higher rates – If interest rates drop, you won’t benefit from lower repayments.
- Break costs – If you refinance or pay off your loan early, you may incur high fees.
Variable Rate Loans
A variable-rate home loan fluctuates with the market, meaning your repayments can change over time.
Benefits:
- Potential for lower rates – If interest rates decrease, so do your repayments.
- Greater flexibility – Many loans allow for extra repayments, offset accounts, and redraw facilities.
- Good for financially flexible borrowers – If you can accommodate rate changes, you could save money over time.
Downsides:
- Budgeting can be tricky – If rates increase, your repayments will rise.
- Market uncertainty – Hard to predict what interest rates will do in the future.
Split loans
A split loan is where you choose a fixed rate for part of your loan and a variable rate for the rest. The fixed portion helps to protect you from rate rises while the variable portion allows you to pay off some of your loan sooner, and benefit from any falls in rates.
This can also be an option. Talk to us at Elders Finance to find the right balance for your financial future.
Do your sums
Use our calculators to do your sums and see how much you'll be paying. We've also got calculators so you can see how much you can borrow, how much extra repay,emts can effect your loan and more.
Disclaimer: This information is general in nature and does not consider your personal objectives, financial situation or needs. Brokerage services provided by Elders Home Loans Pty Limited (ABN 22 118 064 654; Australian Credit Licence 384408) or its authorised credit representatives; or by Elders Asset Finance Pty Limited (ABN 39 670 506 617; Credit Representative Number 558452) as authorised credit representative of LMG Broker Services Pty Limited (Australian Credit Licence 517192). Lending criteria apply. Not all products of all lenders may be offered.