Variable Rate Loans:
A Variable rate loan is a loan with interest rate subject to change and the repayments/interest rate fluctuates when the lender decides to increase or decrease their interest rate.
- Pros: Benefit from interest rate drop, Redraw facility, Offset account, able to change loan at any time.
- Cons: Interest rate could go up at any time resulting in paying more.
Fixed Rate Lons:
A Fixed rate loan is the type of loan where your interest rate in locked at a certain rate for a certain period of time usually 1 to 5 years.
During the fixed rate period, your interest rate won’t be impacted by the interest rate fluctuation and will remain unchanged until the end of fixed rate period.
- Pros: Interest rate security and repayment certainty. This will give your a peace of mind and you’re able to budget effectively without having to stress that the interest rate might go up next month impacting your monthly repayments.
- Cons: You will not able to take advantage of rate any drop or add any addition features to your home loan such as Offset Account of Redraw Account.
Split Rate Loans:
A split loan is when you divide the loan into multiple parts (Variable+Fixed) to get the benefits
of both worlds.
Interest Only:
An Interest Only loan is the type of loan where you pay just the interest and not the principal for an agreed term (usually 1-5 years).
- Pros: Interest Only repayment could be lower.
- Cons: With Interest Only Loan, the principal remains unpaid.