Whether you’re a first home buyer or are moving from one home to another, chances are high that you need to find the mortgage that’s right for you, and you’re looking for a way to understand the process as easily as possible. At STARK Finance, we’re here to help you determine which mortgage option is right for you. We are located in Australia, but the information you will find on this page can still be helpful to you anywhere in the world when you need to take out a mortgage on your home.
Fixed Rate Mortgage
A fixed rate mortgage will charge you a set rate of interest each month, and this interest rate will not change across the life of the loan. Fixed rate mortgages are generally easier to understand and pay than variable rate mortgages, because with a fixed rate mortgage, you will always know exactly how much you are paying and you won’t need to stress about sudden hikes in the price.
- The amount you pay on your mortgage each month can vary slightly depending on how much principal and how much interest you are paying. However, you can expect the total payment to remain the same regardless.
- The main downside of fixed mortgage rates is that when the market is tough and interest rates are high, it may be more difficult to qualify for a loan. Once you qualify for a loan, this worry is behind you for good.
- In 2021, the fixed mortgage rates in Australia are very low thanks to the RBA deciding to lower the official cash rate.
Variable Rate Mortgage
Variable rate mortgages are also called adjustable rate mortgages. Variable rate mortgages will act as fixed rate mortgages for the first month or possibly the first few years of your mortgage. However, interest rates can vary after that point, sometimes significantly.
In other words, when you first take on a variable rate mortgage, you will be paying interest rates that reflect the market when your loan began. When your fixed period is up, a new fixed period will begin that reflects the market at that new point in the loan. This may mean you pay higher interest rates than you were before, which can be an unpleasant surprise if you’ve been struggling to make your previous payments. However, there is always a chance that you could begin paying less than you were before if the market is poor and interest rates are lower. It is difficult to know in advance how much you will end up paying with a variable rate mortgage.
Why do many people choose variable rate mortgages? The initial payments for variable rate mortgages are usually low, which may allow a buyer to qualify for a larger loan (and therefore a larger house). However, variable rate mortgages carry high risks, and initial low payments are not likely to last for longer than the first few years.
Although everyone’s circumstances and preferences may differ, we believe that for most first-time homeowners, a fixed mortgage is the way to go. If you are looking for fixed mortgage rates in Sunshine, VIC Australia, we at STARK Finance are especially looking forward to helping you. Taking out a mortgage on your first home is a big, often intimidating step. Choose experienced mortgage brokers who are familiar with the area and love it as much as you do.