Financing your dream home; variable vs fixed rate home loans

Financing your dream home
Financing your dream home in Australia

We’re going to taker a look at the types of home loans available as well as offer you some wholesome advice to help you make your dream of owning your own home a reality.

Whether you are newlyweds or looking to start a family, purchasing a home is an exciting chapter in your life. However, it’s a large commitment which means the decision is accompanied by an understandable amount of stress.

But, luckily, there are a variety of lenders and financial institutions with knowledgeable consultants at your disposal who can help you to finance the home that you have always dreamt of.

This article will explain what a home loan entails and differentiate between the various types of home loans to assist you to make the most informed choice.

Unlock the door to a new life

Individuals do not have large amounts of money saved up to allow them to purchase a property which is why home loans, or mortgages, are available to help fellow Aussies purchase the home they have their hearts set on. Whether you are buying a home for the first time or are looking to refinance one, there are a variety of lenders and financial institutions that you can choose to finance your home through.

Home loans are the most popular example of secured loans. Typically secured loans refer to a loan which is secured against an asset. When taking out a mortgage, the property that is being financed is used to secure the loan.

Should the borrower find themselves in a position where they are unable to meet the loan repayments, the property will be sold and the balance due will be deducted from the sale of the property.

Secured loans also give the borrower the freedom to borrow larger amounts of money at better interest rates and repay the loan over a longer period because of the added security provided by the property.

The right home loan for your situation

When it comes to your finances, no one knows them better than you. Before applying for a loan it is important to completely understand your past and present financial situation. This will provide you with a clearer idea of how much you can spend on purchasing a new home and direct you towards your ideal financial future.

You’ve got ALL the options

When it comes to arranging your mortgage there are two standard options to choose between: a fixed- and variable home loan. Each type comes with its perks and drawbacks and the type that you decide to go for depends on your personal preferences and current financial situation.

Types of home loans Australia

Fixed rate home loans in Australia

Everything about a fixed home loan is fixed: repayments as well as the interest rate. This means that if you choose to repay your mortgage over ten years, then the rate will remain the same for the entirety of the ten years. Once the ten year period has ended, the borrower can choose to fix the loan for another ten years or any other loan period.

Borrowers often decide to do this when a good rate is presented to them or to specifically be able to repay the same amount of money monthly ensuring that they will be able to afford the loan with their current budget.

Making additional monthly payments or repaying the loan early is not always an option with a fixed home loan and borrowers will often have to pay a large fee before being able to settle. A fixed home loan can be a large commitment to make and the borrower should be sure of their financial prospects before deciding on this loan type.

Variable home loans in Australia

A variable home loan is quite the opposite of its fixed counterpart. The borrower has a lot more freedom in how the loan is organized and repaid and can even make additional monthly repayments or settle the loan early. But the interest rate of the loan is constantly changing which means that your repayments will either become higher or lower according to the current rate.

Variable home loans are generally the preferred option because of their flexibility but the borrower should only consider this option if they can handle the potentially higher repayments. While both loan types are attractive in some way, the borrower should choose the option that is most suitable for their situation.

Split home loans in Australia

Some lenders also offer the option of choosing a split loan which combines both fixed and variable loan features. This means that the borrower can choose the loan amount to be spread over a 50:50 ratio or any other ratio they prefer. In doing so the borrower can still maintain a fixed monthly repayment while repaying additional amounts at no additional cost.

Comparing home loan options

Using a broker to access home finance

When it comes to accessing home finance making use of a broker is the best way forward. This is because brokers have access to a comprehensive range of lenders and loans and are best able to assess your needs and match you with a lender and loan types that is suited to you and your needs and goals.

Compare home loans using a loan comparison site

There are a handful of loan comparison websites that can assist you in finding and comparing the leading mortgage products on the market. Although it may be both interesting and informative to do so, this activity should only be used as a guide and should not be substituted for professional advice from a home loan expert or broker.

These are only a few of the options that a prospective homeowner can consider but they are also the most popular for a reason. Consult with a consultant at the lender of your choice and discuss the option that is best suited to your preferences or use a loan broker. Your dream home no longer has to be a dream; make it a reality with the assistance of a home loan.

Popular & reliable direct lenders offering Home loans

  1. Bank of Sydney Home loan

    Bank of Sydney

    • Loans up to $200,000
    • Term up to 30 years
    • Interest from 3.79%
  2. Adelaide Bank Home loan

    Adelaide Bank

    • Loans up to $300,000
    • Term up to 30 years
    • Interest from 4.39%
  3. Aussie Home Loan Home loan

    Aussie Home Loa...

    • Loans up to $400,000
    • Term up to 30 years
    • Interest from 3.86%
  4. UBank Home Loan Home loan

    UBank Home Loan

    • Loans up to $2,000,000
    • Term up to 30 years
    • Interest from 3.69%