Fixed Rate Home Loans

Welcome to our Fixed Rate Home Loans information page: This page is designed to assist you in understanding the basics of this type of loan and to give you an understanding of some of the features and downsides.

About Our services:

  • Our brokers are experts in obtaining home loan approvals and specifically trained in loan structuring and credit policy, ensuring the best possible outcome for your needs.
    • We provide an Australia wide service, at no cost to you.The lenders pay us a commission for the introduction of your business.
    • Our website is designed to help borrowers understand the differences between loan types and the importance of having a mortgage broker to assist you in finding the right lender.
About Fixed rate Home Loans:

What is a fixed rate home loan?

Providing the security of knowing exactly what your repayments will be, therefore protecting you against interest and repayment increases, for the term of your fixed rate home loan period that you have chosen.

A fixed rate home loan means that the rate will remain exactly the same while you are in the fixed rate period that you have chosen. For example, you may choose to have a three year fixed rate and for three years following the funding of that loan, your interest rate and repayments will not change.

  • When you select one of the many fixed rate home loans, you are basically asking the bank to lock in the rate for a set period.
  • You will be locked in to this rate and your repayments will remain the same throughout the term chosen. Terms range from 1 to 15 years and you need to seriously consider if this loan will be suitable for you simply because these loans are known to be restrictive.
  • At the end of your contracted period, you will come onto whatever the variable rate is with your lender, on that day.
  • Important warning: This is the only type of loan where we feel a warning needs to be issued.
  • It is crucial that you understand the contract that you will be entering into with the lender BEFORE you apply for a fixed rate home loan.
  • This is a lock in type contract that has little downsides for the lender. Once you are in the loan, it will cost you to get out.

Should You Choose a Fixed Rate Home Loan?

You will need to decide if the benefits outweigh the downsides before applying for a fixed rate home loan.

The reason it is important to decide beforehand, is that once you are in a fixed rate, you will have to pay an expensive fee known as a break cost or exit fee, to exit the loan.

This fee will apply if you want to sell your property, or even if you just want to change to a different loan, even if it is with the same lender.

What benefits are there for you in fixed rate home loans?

  • You can lock in a set interest rate for any a certain time period. These fixed rate periods will range from 1,2,3,4.5,10 and 15 years.
  • If interest rates were to increase substantially, your repayments would be protected until the end of your fixed-rate period.
  • Your repayments are set for the fixed rate period that you have chosen. This is an advantage, provided that interest rates are not decreasing.
  • Your interest rate is set for the fixed rate period that you have chosen. This is also an advantage, provided that interest rates are not decreasing.
  • A fixed rate home loan will allow you to budget more efficiently as your repayments do not change.
  • A fixed rate home loan may be cheaper for you than other loans available depending on the market and also depending on the lender.
  • You can often use a fixed rate as part of a structured loan in order to make your home loan more tailored to your needs. This means you could have a split loan which is part fixed and part variable allowing you certainty and flexibility at the same time.
  • You can use a short-term fixed rate home loan such as a 1 year fixed rate or a 2 year fixed rate, to smooth out times when income is uncertain. For example you may only be receiving one income because there is a new baby arriving and it can be refreshing to know that your repayments are set until mum goes back to work.

What do you need to be careful of in a fixed rate home loan?

  • There will be substantial costs associated with trying to exit a fixed rate home loan early. These are known as break costs and are not negotiable with your lender. The reasons that you may want to break a fixed rate loan will not matter to the lender. The idea is, that you will remain in your contract for the fixed-rate period that you have selected.
  • Most fixed-rate loans will not allow you to pay off any more than $10,000 per calendar year over your normal repayments. Some fixed rates will not allow you pay any extra at all.
  • You would not be able to take advantage of interest rates reductions, as your rate will remain fixed.
  • You can’t refinance your fixed rate loan while you are in the fixed rate period. If you absolutely need to do so, then break charges will certainly apply.
  • If you intend on pay a substantial lump sum on to your loan in the future, and you are in your fixed-rate period, break charges will apply if it is above the extra repayment limit set by your lender.
  • If you want to leave your lender, and you are in your fixed-rate period, break charges will apply.
  • If you need a loan that has flexibility, then a fixed-rate loan may not be a good option for you as most fixed-rate loans have limited features such as no redraw, no offset account allowed and no major deposits. They are in general a very restricted loan.

How can I apply?

These are your simple steps to apply for a loan.
  • Contact us on the numbers above to speak to a mortgage broker, or complete our online enquiry form.
  • You will speak with a broker who will take into account your needs by discussing not only your requirements, but also any concerns you have, and offer you some possible strategies and ideas that you may not have thought about.
  • Once we know what you require, we will draft and email you a proposal– this will usually consist of a few options that are easy to understand.
  • Once you have had a chance to look at what options are available, you can contact your broker or the broker will call you, to discuss the proposal.
  • You can then decide if you wish to proceed or you may just want to discuss more options.

What are my other options?

There are many options available:
  • Whether you are after a variable interest rate, a fixed interest rate, interest only loan, equity loan or any of the other loans available, it is important that you find out what is available to you before applying for a loan.
  • The loans listed below are available for most lending purposes. Whether you are refinancing your home loan to a lower rate, or a property investor looking to buy that second or third property, we will have some ideas for you to consider.
  • Even if you are a first home buyer purchasing a new home or renovating your existing home, there are some great deals available from the banks and lenders that we are accredited with.
  • Please click on a link below to learn more about other loans that are available to you.
Summary:
  • There is no “one loan fits all” scenario in home loans and to be fair to our clients (and to ourselves) an assessment must be done at our first point of contact with you in order for us to understand your situation.
  • All information remains confidential of course, whether you decide to apply for finance, or not.
  • We are very easy to talk to. We have been dealing with home loans since 1998. You can be sure that when you call us to discuss your needs that you will be speaking with a professional consultant, who does actually care about your situation.
  • We understand that without our clients, we have no business.

NOTE: These pages are of general advice in nature. They have not taken into account your specific needs and objectives and are therefore designed to provide general information only. Before acting on any of the information contained on our website please have your Mortgage Broker assist you in determining the right product for your individual needs.

Posted 20 February 2015
Copyright © 2015 Illawarra Mortgage Brokers.

Specializing in Residential and investment lending.

Mortgage finance brokers located in the Wollongong, Corrimal, and Kiama and Shellharbour areas.

Lending Australia wide

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