Which One Suits You?
Buying a property is one of the biggest financial decisions you’ll make, and choosing between a fixed or variable rate loan can shape how you manage repayments and plan your future. Both options have strengths and limitations. This guide will walk you through what each one means, who they may suit, and how to decide with confidence.
What Is a Fixed Rate Loan?
A fixed rate loan locks in your interest rate for an agreed period, usually between one and five years.
Benefits:
- Certainty of repayments, making budgeting easier.
- Protection against interest rate increases.
Considerations:
- Limited flexibility to make extra repayments.
- Break fees may apply if you refinance or repay early.
- Fewer features like offset accounts.
What Is a Variable Rate Loan?
A variable rate loan moves with the market, meaning your repayments can rise or fall depending on interest rate changes.
Benefits:
- Flexibility with features like offset accounts and redraw facilities.
- Often allows unlimited extra repayments.
- Potential to benefit from falling interest rates.
Considerations:
- Repayments may increase if rates rise.
- Less certainty, which may impact strict budgets.
Factors to Consider Before Choosing
- Your budget and how much certainty you need.
- Your comfort level with potential repayment changes.
- Whether you plan to refinance, sell, or repay early.
- The features you value most, like offset accounts or extra repayments.
Our Client Results in deciding the loan rate
We recently worked with two Melbourne first home buyers. One chose a fixed loan to lock in predictable repayments for the next three years, giving her peace of mind while adjusting to home ownership. The other chose variable to take advantage of an offset account and make extra repayments whenever possible. Both outcomes were right for their individual needs — because the loan type matched their lifestyle.
Is a Split Loan Right for You?
A split loan combines both fixed and variable components, giving you some repayment certainty while keeping flexibility on the variable portion. This option can balance peace of mind with opportunity.
