Fixed or Variable Home Loan: Which Option is Best for You?

Fixed or Variable Home Loan: Which Option is Best for You?

Both options come with their own set of advantages and drawbacks, and the right choice depends on your financial situation, goals, and risk tolerance. Your choice can have a significant impact on your monthly payments, budgeting, and financial stability. This article will assist you in determining which option aligns best with your needs.

Fixed Interest Rate offers stability and peace of mind knowing that your interest rate is set in stone for the term of your home loan. With a fixed rate, you know exactly how much your repayment will be each month, making it easier to budget and plan your finances. This option will protect you from the market interest rate increases and potentially draining your budget.

However, there are potential downsides to fixed-rate home loans such as higher initial interest rates compared to variable rates. Therefore, a fixed rate will make it more expensive in the short term. Another downfall is that if the interest rate decreases, you won't be benefitting from these lower rates with your fixed rates option.

Variable Interest Rate offers flexibility. One of the reasons why loaners opt for variable interest rates is the fact that these loans carry lower initial rates. Also, If the market rates drop your repayment can decrease, allowing you to save money on interest. Quick savings can be advantageous for short-term homeowners who plan to sell their homes within a few years.

However, variable rates also come with risks, such as monthly repayments that will increase as the market rates increase. Budget uncertainty and potential payment shock with substantial rate increases.  Choosing a variable interest rate necessitates allocating space in your monthly budget to accommodate the possibility of an increase in interest rates.

The decision between a fixed or variable interest rate depends on your financial goals. The best interest rate for your home loan is the one that meets your unique needs and financial circumstances. If you value stability, have a comfortable budget, and want to protect against rising interest rates, a fixed-rate home loan may be your best option.

On the other hand, if you're looking for more immediate affordability and are comfortable with some level of uncertainty, a variable-rate home loan could work in your favour, especially if you plan to sell or refinance in the near future.

At 3%.Com Properties, when you're ready to purchase your next property, we connect you with experienced bond originators. These professionals will engage with you to explore and negotiate the most favourable interest rates (variable or fixed), available across leading banks.

Ready to buy or sell property? Contact Us today.