Fixed Vs. Variable. What are the pros and cons?

Choosing between a variable or fixed rate home loan can be a difficult task and you may hear different opinions from different people about which is better. However, which option is best for you is dependent on your individual situation and financial needs. To help you make that decision when the time comes we have outlined a pro and con for each option.

Fixed rate home loans:

Pro: A fixed rate home loan provides you with a sense of certainty. With this type of loan you will know exactly how much your repayments will be for the term of the fixed rate chosen. This helps you ensure you will always be able to afford them. Even if your lender increases their rates you will not be affected.

Con: With a fixed rate home loan you typically cannot make extra repayments. This limits the speed at which you can pay your loan off. This could result in you having debt for longer than you want too. However, with our Balanced Home Loan range you can make extra repayments without being penalised (Up to $20K per annum while on a fixed rate). This is another way in which Bluebay Home Loans is a lender with a difference.

Variable rate home loan:

Pro: A variable rate home loan is flexible and can potentially save you money. If interest rates decrease during the course of your loan, your repayments will be reduced. Therefore, you may end up paying less each fortnight than you had initially expected. With a variable loan, you also have the ability to make extra repayments without being penalised meaning you can shorten the length of your loan.

Con: With a variable rate loan, there is always a level of financial uncertainty and risk. You cannot predict how interest rates will change over the course of your loan. If interest rates rise then so will your repayments. Therefore, prior to selecting this type of loan it is important to calculate whether you would still be able to afford your repayments if you were required to pay more each fortnight.

Our friendly home loan consultants are happy to answer any questions you may have regarding either of these options, call us today on 1300 258 229.