Common thought is that fixed-rate home loans are the safer choice, and this is certainly true in many situations.
However, there are times when a variable-rate home loan simply makes more sense.
When should I choose a variable rate?
In most cases, how long you plan to stay in your home should act as the deciding factor.
For instance, if you plan on buying a home and then upgrading within a couple years, a variable-rate mortgage might be the best fit for you.
Variable-rate mortgages typically have a lower starting interest rate than their fixed counterparts. Also, variable rates generally aren't in danger of rising until after a certain introductory period.
Therefore, if you plan on selling your home and paying off your loan, you don't need to worry about rates rising. As a bonus, you can also take advantage of the initially lower interest rate.
Loans with variable rates can also contain more flexible features than fixed-rate loans, meaning if you have special needs that need to be accounted for, opting for a variable-rate option might suit you better.
However, in many cases, taking out a fixed-rate loan is the safer option.
Even if you can get lower interest rates at first with a variable rate, costs will eventually rise. Only people with a fixed-rate mortgage can rest easy knowing they'll be paying the same rate they locked in from the beginning throughout the entire length of their loan.
You can contact a Smartline Mortgage Adviser on 13 14 97 for home loan advice. Or complete our call request form and we'll call you!