Considering a Fixed Rate Loan?

Refinancing into a fixed rate loan might be a good idea if you borrowed up to your full repayment capacity when rates were low, or you can see you are going to have trouble making repayments if interest rates go any higher.

If you currently have a variable loan and are considering moving to a fixed then our Variable vs Fixed Rate Mortgage Calculator allows you to compare costs between the two types and test the effects of future interest rate rises on repayments.

Now is the time to make a decision before rates go any higher and problems start to occur. If you leave the decision to go fixed until you are in financial stress it may be too late and you will be rejected by lenders concerned about your repayment ability. Take the time now to assess your current financial situation and work out how your budget will cope if interest rates rise by another 1 or 2%.

If you are looking to buy a house or renovate then try to keep your borrowings as low as possible. Factor in increased rates to ensure you are not over committing yourself.

An option to consider is a split rate loan. Borrowers have the security of knowing that the fixed portion provides partial protection against rising rates while the variable portion means savings if rates fall. This is a compromise solution that helps provide a safety net for those whose budget may be tight.

Another strategy you can use to minimise the effect of rising interest rates is debt consolidation. If you haven't already, fold all your high interest debt like credit and store cards into your new fixed rate loan.

Decreasing the amount you owe now is the best protection strategy of all. If you can increase your repayment schedule or make voluntary repayments by depositing tax returns etc then you will provide yourself with an extra margin of safety if rates continue to increase. It may also pay to consider income protection insurance.

If you are thinking about refinancing, renovating or buying a house and are considering a fixed loan, discuss your options with a mortgage broker. Unlike banks who only promote their own products, a mortgage broker has access to lots of different loans and lenders and should be able to locate the best product for your needs, and there is no charge to you for their service. The lender pays.

The Home Loan Club (HLC) is an emerging online exchange that connects interested consumers to various professional mortgage services companies in its Australia wide network. Fill out the online form for a free no-obligation quote.