What Are the Up Sides of Fixed-Rate Home Loan?

When selecting a home loan, borrowers are often stuck in the dilemma whether to take a fixed-rate or a variable-rate product. While both have their pros, in this post we’ll help you understand all the advantages of a fixed-rate home loan.

What’s a fixed-rate home loan?

A fixed-rate loan locks your home loan repayments into an unvarying interest rate for a certain time span. When you decide to go for a fixed-rate home loan, your lender will most probably provide you a rate lock. This entails that the rate being offered with your loan will be fixed from the point of application to the end of your fixed-rate agreement.

A fixed-rate loan is neither for everyone nor does a one-size-fits-all solution for your house loan requirements; but it surely have its own share of advantages.

It gives certainty:

Relying upon how you think about it, having a fixed monthly repayment is useful, particularly if you’re a sort of individual who likes certainty. A fixed-rate loan lets you establish your budget & stay on top of your repayments more easily as you get the idea of exactly how much you’ll be paying weekly, fortnightly or monthly. You’ll be paying the same sum until the time comes that your loan relapses to a flexible interest rate. At that time, you’ve the liberty to re-fix your loan, letting you take benefit of your lender’s new fixed rate.

Safeguards you from unexpected rate hikes:

When the housing market is on the peak & wages are on the higher side, it’s more likely for the Federal Reserve Bank of San Francisco to increase the official cash rate, making lenders to follow suit and increase their lending costs. However, there’re other instances, when lenders make out-of-cycle hikes, particularly when they’re encountering funding strains.

In such a circumstance, having a fixed rate loan will give you a sigh of relief. If interest rate increase, you’ll stay unaffected. It’s very sensible to apply for a house loan when the lending environment is in a low-interest scenario. This way, you can take benefit of a low interest rate even if rates rise suddenly.

Allows you to save big:

Having a fixed rate loan proffers you with the opportunity to save for a rainy day. With a fixed interest rate, you’re not subject to any hikes, letting you save & allocate your money for other expenditures.

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