Is It the Right Time to Fix Your Home Loan?
With interest rates at rock bottom, most homebuyers are asking themselves the tough question, “Should I fix my credit or not?”
Rising interest rates can have a big impact on your lifestyle. And because of this, you should consider your future plans, budget and financial flexibility when deciding whether or not to fix your credit.
A fixed rate home loan allows you to lock in an interest rate for a set period of time. The most popular term ranges from one to five years. During this period, your interest rates and monthly payments remain the same, whether or not lenders change their interest rates. At the end of the fixed term, you have the option to re-fix the loan or switch to a variable rate loan option. Whether you are new to the home buying business or looking to purchase a second home or property, the time may be right to take out a fixed rate home loan. Fixing the interest rate on your home loan is a way of managing risk. If a rise in interest rates would have a significant impact on your ability to repay your loan, then fixing your interest rate makes a lot of sense.
However, before you make such a big decision to decide to fix your home loan, there are a few factors to consider. You should first look for a lender that will offer some flexibility, and you should also ask yourself and maybe get some advice about how things might play out three or five years from when you’re considering fixing your credit. Locking in for a shorter period may make more financial sense as you monitor market trends.
Do you love security? The main advantage of fixed rate home loans is the fact that you can sleep better at night and even plan ahead because you already know what your monthly obligations are. However, one of the disadvantages of a fixed rate home loan is that most lenders will not allow you to pay off your loan early or make additional payments without incurring penalties.
If you’re still undecided, there’s always the option of having your cake and eating it too. A split loan option gives you the chance to have part of your loan fixed and the other part variable.
Once you’ve done your homework and decided which type of loan to choose, always remember that if you don’t ask, you won’t get it. If you use a mortgage broker, ask the broker to negotiate the most flexible option that suits your financial situation.
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