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Adelaide Home Loans - Variable or Fixed Rate?

Variable vs Fixed Rate Home Loans - What’s Best for Me?

There are literally hundreds of home loan products to choose from, and every homeowner has dealt with the tough decision of choosing whether to select a variable home loan or a fixed rate loan. Fixed and variable rate loans are the most common types of loan on the market in Adelaide and Australia as a whole. On the surface what may seem as a cut and dry decision to select either option, is really worth researching in-depth to ensure that you’re making the wisest decision possible.

Fixed Rate Loans

A fixed rate loan offers you the security of having the same interest rate throughout a specific term in the loan (normally the entire loan term), whereas a variable rate loan has a changing interest rates based on the terms of the particular loan, that can yield savings and flexibility.

Advantages of fixed rate home loans:

Safeguard against higher or rising interest rates
Provide consistent payment terms
Your payment amount is protected from market volatility

Disadvantage of fixed rate home loans:

Less flexibility in loan terms
Subject to higher interest rates
You can incur expensive penalties if you break the terms of the loan

Variable Rate Loans

Variable rate loans are the most popular loans in Australia and are widely used in the purchase of homes in Adelaide. The flexibility and selection of options available with variable rate loans are the reason for their popularity. There are two commonly used variable loans: basic variable and standard variable.

Basic Variable

Basic variable loans are known as the “cheap home loan” and typically have lower interest rates than most other types of loans. However, as the name implies these loans are no frills and offer few features or perks, but if obtaining the lowest interest rate possible is your main concern, then this may be the way to go for you.

Standard Variable

Standard variable loans offer the best selection of features and options when it comes to the repayment and management of the loan. Some of these options include: split loan capacity, accelerated repayment, and top-up. However, these options come at a cost that is higher than that of a basic variable rate loan.

Advantages of a variable rate loan:

Can save you a large of money when interest rates are low
Flexibility and range of options
Large amount of competition, which means saving for you

Disadvantages of a variable rate loan:

Payments can always change
Interest rates are volatile
May pay for features you do not need

Speaking with a home loan broker can help you solidify which home loan product is best for your Adelaide home. Call Choice Home Loans today.

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Wayne Hart is one of our many Choice brokers that can help guide you through the mortgage maze.