It is time to purchase your property. What kind of loan will allow you spend less and save more? The need to a permanent home comes along with other factors that one needs to consider. You need to make a good choice to avoid regrets and unnecessary misfortunes. When it is time to acquire property, people get confused on what will best suit their needs. Choosing between fixed and variable home loan is tricky. It needs extensive knowledge or advice from experts. Fixed and variable home loans are different and they both come with their advantages and disadvantages. Buyers of property should come up with a clear decision on what kind of home loan they want. There are several facts about fixed and variable home loans that you should have in mind to help you make a decision.
FIXED HOME LOANS
They are the rates that have fixed interests, which do not change within the agreed loan period. Clients choose a period for their fixed loan interests where the rates will change after the lapse of the period. In case the home loan has a balance at the end of the fixed period, the loan converts to variable loan.
Advantages of fixed home loans
- The rate of interest for home loans does not change until the end of the agreed time.
- It is easy to budget on fixed home loans because one has the view of his or her repayments.
- In the event of increase on rates, one is likely to be safe because of the agreed terms on fixed home loan.
Disadvantages of fixed home loan
- Higher interest rates compared to those of variable home loans.
- Additional repayments are limited for a loan.
- In case of any decrease on the rates for the loan, you remain with the terms as agreed for the fixed home loan.
Tips for Choosing Fixed Home Loan
- Get finance, which will take extra repayments.
- Get idea on costs you will require incase you need to break loan.
- Make a choice that best suits your needs.
VARIABLE HOME LOANS
The interest in variable rates differs throughout the loan period. It may either increase or decrease as much as the loan exists. Refinancers mostly apply variable home loans.
Advantages of variable home loan
- When one agrees to the loan terms, the interest rates are likely low compared to the fixed home loan.
- Additional incase of repayments for the loan with no penalty.
- Refund of money paid in advance.
- It is possible to have a side account to reduce interest charges.
Disadvantages of variable home loan
• Repayments will vary with changes on interest rates.
• One has no protection on changes that takes place on the rates.
With all the necessary facts that come along with fixed and variable home loans, it is easy to make the right decision. You only need a checklist to be sure of what to and not to expect.