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Home Buyers Finance Guide V2

Interest rate type Advantages Disadvantages Fixed interest rate loans • You know exactly what your repayment will be, making it easier to plan your budget • Often there are some good ‘special’ fi xed term rates • You can lock in a good fi xed term rate if the market interest rates are rising • Can be more diffi cult to make extra repayments • Floating rates could drop and you would stay on a higher fi xed rate • You are locked in for the period you signed up for and could incur ‘break fees’ to terminate early Floating/variable interest rate loans • You can make a lump sum payment or extra payments at any time without penalty • You can refinance the loan at any time without penalty • If interest rates drop your loan repayments will reduce • If interest rates rise, your mortgage repayments will increase as well • The interest rate may be higher than a fixed rate mortgage Split interest rate loans • Can make extra repayments without penalties on the fl oating rate portion • You have certainty over the fi xed portion of the loan • It gives you a mix of interest rates so any rises and falls will not cause big changes in your repayments • Rising interest rates will affect the fl oating portion of your loan • You need to decide how much to put in each portion


Home Buyers Finance Guide V2
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