Is It the Right Time to Fix Your Home Loan?

With interest rates at an all-time low, most homebuyers are asking the tough question: “Should I fix my credit or not?”

Rising interest rates can have a major impact on your lifestyle. Because of this, you should consider your future plans, budget, and financial flexibility when deciding whether or not to repair your loan.

A fixed rate loan allows you to secure an interest rate for a specific period of time. The most popular term ranges from one to five years. During this time, your interest rates and monthly repayments will remain the same whether or not the lenders change their interest rates. At the end of the fixed term, you have the option of fixing the loan again or switching to a loan with a variable interest rate. Whether you are new to the home buying business or looking to buy a second home or property, the time could be right for a fixed rate home loan. Setting your mortgage rate is one way to manage risk. If rising interest rates would have a significant impact on your ability to repay your loan, fixing your interest rate makes a lot of sense.

However, before you make such a big decision to fix your home loan, there are a few factors you need to consider. First, you need to look for a lender that offers some flexibility, and you also need to ask yourself, and perhaps seek advice, on how things might play out three or five years after you are considering taking out your loan repair. Fixing for a shorter period of time may make more financial sense if you monitor market trends.

Do you love certainty? The main benefit of fixed rate home loans is that you can sleep better at night and even plan ahead knowing what your monthly commitments are. However, one of the disadvantages of a fixed rate home loan is that most lenders will not allow you to prepay your loan or make additional payments without incurring penalties.

If you’re still undecided, there’s always the option to have your cake and eat it. The split loan option gives you the ability to have part of your loan at a fixed rate and the other part at a variable rate.

After you’ve done your homework and decided on a loan type, always remember, if you don’t ask, you won’t get it. When hiring a mortgage broker, ask the broker to negotiate the most flexible option that suits your financial situation.