Fixed Mortgage

Most home loan mortgages today are written on a 30 year loan term and will include an option to fix the interest rate at settlement or at any other time during the loan term for a period of up to 10 years. Most fixed mortgage periods are for 3 or 5 years.

• Certainty for you as a borrower. You know exactly what your monthly repayments will be under a fixed mortgage during the fixed rate period. At the end of the fixed mortgage term you will have the option of reverting to a variable rate or refixing for a further term.
• If variable interest rates increase your interest rate will remain the same.

The negatives of a fixed mortgage:

• While you are able to budget better you will not benefit if interest rates fall.
• If interest rates fall then the cost to "break" from a high fixed mortgage can be significant. Before breaking your fixed mortgage make sure switching or refinancing into a lower variable rate loan is a viable proposition and that you will recoup any break costs reasonably quickly. What you don't want to do is break out of a fixed mortgage only to find that within 12 months variable rates have increased, the interest differential has disappeared and all advantage is lost.

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