Fixed Rate Loans for Peace of Mind
With the mortgage rate increases likely in the near
future consider fixing the rate with the help of the
Home Loan Club.
About Fixed Rate Loans
Unlike
a variable rate loan, which fluctuates according to
market pressures, a fixed rate loan will remain the
same during the period for which it has been fixed thus
providing protection from rate fluctuations. Loan payments
remain fixed during the selected period. A loan can
be fixed for periods of one to five years, with some
lenders now introducing longer fixed rate periods up
to 15 years. The borrower is charged a premium or higher
interest rate in return for a longer period.
Funding for fixed interest rate loans come from different funding sources. Lenders borrow money on fixed terms to lend on fixed terms. Any change to the terms can cause them to lose money, which in turn they pass on to the end user - the borrower. Therefore the lender will usually place restrictions on extra repayments during the fixed period. In the event that the borrower wishes to discharge a loan before the fixed term has expired, the lender will charge a penalty or break cost to compensate for the economic loss caused by the rate adjustment as well as the standard administrative charge.
In most cases the break fee will be the value of the foregone payments.
Most fixed rate loans will not offer a redraw facility. At the end of the fixed term the lender may offer another fixed interest period otherwise the loan will revert to a premium priced variable product. The opportunity to refix the interest rate may incur an additional cost.
As you can see the issues ate complex and Home Loan Club accesses the services of experienced home loan consultants to sort through the many fixed rate products offered by dozens of banks and other lenders.
Please use the Enquiry form for quick response to your specific situation.
Capped Rate Loans
Capped Rate Loans are another way to protect your repayment levels and also take advantage of the drops in interest rates.
An alternative to a fixed rate loan is a capped rate loan. With this type of loan the interest rate is not allowed to rise but the borrower will benefit from any falls that may occur as the official interest rate falls. Some lenders may charge a premium on a capped rate loan - a one of cost to the borrower. At the end of the capped rate period the interest rate may rise, and the borrower may incur additional costs to switch to another product with the same lender.
