Should you fix your home loan?

As you know, interest rates are currently at historically low levels. Experts are predicting that the Reserve Bank of Australia will drop the cash rate at least once more this year, which means there is potential to save some money if you act now.

If you have a flexible home loan you may have the ability to review its structure and split it into variable and fixed portions. If you are considering this course of action, there are a few things you need to know about a split loan:

1. A split loan is ideal for taking advantage of low variable rates while they are on offer.

2. You get the flexibility of the variable rate with the security of a fixed rate.

3. Common split ratios are 50:50, 70:30 or 60:40 over a two-way fixed and variable rate.

4. You may be able to make additional payments and have a redraw facility (this depends on the lender).

5. The fixed rate component of the loan will give you the ability to budget confidently while the variable portion allows you to pay off as much of the loan as you like (minimum repayment apply).

6. You may also be able to make two or more splits of the variable option. This may come in handy if you have more than one offset account.

While we’re on the topic of loans, have you considered reviewing your mortgage? If you think that a split loan might suit your needs, or if you’re just curious about the different deals in the marketplace, there’s never been a better time to act.

Everyone’s financial situation is different and what might have worked for you five years ago may no longer measure up. The marketplace has changed too: there is now more competition for your dollars (and not just from the big four banks – smaller lenders are also getting in on the act). More competition means that there are more potential savings to be had. Contrary to popular belief, mortgages aren’t a “sign the document and never think about it again” deal. Most have the capability to be tweaked and tucked when required.

We suggest you take advantage of the current low interest rates, flexible fees and terms, and lenders that are competing for your business.