Unless you can afford to pay for a home in cash, you will need to take out a mortgage. Every mortgage loan will have an interest rate tacked onto the monthly payment. Interest rates are one thing that helps dictate the type of real estate market that exists. When interest rates are high, there are less people trying to take out loan. When interest rates are low, people start applying for loans to save money on interest. Before house hunting, it’s a good idea to speak with a mortgage broker. Rockingham residents will benefit from understanding the type of interest rates available for home loans.
Fixed Rate Interest
A fixed interest rate is a rate that will stay locked for at least 1 to 5 years. The lows and highs of interest rates will not affect a home loan in Baldivis or any other area during the fixed rate period. If you are able to secure a home loan at a 5% interest rate, your mortgage payment will be calculated at 5% for the duration of the agreed upon term.
The benefits of a fixed interest rate include knowing what you’ll pay each month and not worrying about having to unexpectedly start paying a higher mortgage payment.
Variable Rate Interest
A variable interest rate is one that goes up and down depending upon the official interest rate. If the official interest rate goes up so will your rate. This increases your monthly payments each month. If the official rate goes down so will your mortgage payments. This type of interest rate is ideal for people with a flexible income, who don’t worry too much about rising interest rates.
One benefit is that if the interest rate drops dramatically, your mortgage payment will lower and you’ll have a little bit of extra money each month. A mortgage broker in Kwinana or another area can review your finances and let you know if a variable rate is ideal for your loan.
Split Rate Interest
A split rate takes your interest and puts a certain percentage at a fixed rate and a certain percentage at a variable rate. You can often choose the amount of cash you want to put on the variable rate and the amount to put on the fixed rate. The amount put on the variable rate will be affected by any official rate changes but the fixed rate amount will stay the same. There are different ways to split the loan and a mortgage broker in Rockingham can help you decide if this is the right type of loan.