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· Posted on
July 1, 2021

What is the difference between fixed and variable rate home loans?

There are so many options when taking out a mortgage - let's dig into the difference between fixed and variable interest rates.

What's the key learning?

  • Fixed interest rates will stay the same for a period of time and protects you against potentially rising interest rates
  • Variable interest rate is where your interest rate can rise and fall throughout your loan period, able to pay off sooner

HOW DAFUQ DO I UNDERSTAND MORTGAGES?

When a bank is considering lending to you, they’ll ask you the age old question: do you want a fixed rate home loan or variable rate home loan? Sooo ahhh, what exactly is the difference?

Fixed interest rate:

With a fixed rate mortgage, your payments will be locked in for a period of time.

This will let you plan your future and protect you against potentially rising interest rates (it can’t get much lower than right now, surely).

But just remember, if rates do fall further, you won’t get the benefit of that reduction. Home loans like Macquarie’s Basic Home Loan and Loan.com.au’s Special Offer Fixed Rate Home Loan have some great low fixed interest rates in the market.

Variable interest rate:

If you’re more of a live-in-the-moment type, your variable rate home loan might suit you better. A variable rate is where your interest rate can rise and fall throughout your loan period.

On the plus side, if interest rates fall, you might be able to pay off your loan sooner.

Home loans like Athena’s Celebrate Variable Home Loan and 86 400’s Neat Home Loan have some great variable interest rates in the market.

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