Home Loan Question.

[SpecialMumma]

Hi there :wave:

Hope your enjoying the hub. Its great here.

The interest rate rise yesterday has taken yet another bite off us.

We purchased our house last year & we got a home loan with a variable interest rate :(. Now we are wanting to change to somewhere that has a fixed interest rate, because we dont want to be caught in a few years time unable to afford to pay off our house with an interest rate of 17% or something..

My question is, Would this be recommended to change to a fixed interest rate, and how do I go about changing? And will it cost us to change?

Thanks in advance,
Amy

[andie_pandie]

Hi Amy, thanks for the welcome and yes I absolutely enjoy being on Bubhub.

I think that a lot of home owners and future home owners are not going to welcome the increase in interest rates. And it is always uncertain how high or how low they can go, I know several people whom have been affected in the late 80s to early 90s with the 17.95% interest rates and hopefully that will never come to fruition again, particularly now the average home loan is so much higher.

This is the 3rd .25% interest rate increase since August 06, which is approximately when you purchased your property and I can see why you are now looking at fixing your interest rate.

If you are looking at fixing your interest rate, you need to consider if you are going to remain in that property for the fixed period as if you sell or refinance during a fixed period you may be up for fee to get out of the fixed loan. I can not tell you how much this will be as it totally depends on how much the interest rates are at the time of exiting.

As far as fixing your rate you can look at contacting your bank to find out what there fixed rates are at present and then if you are happy with these rates then they can do a rate change for you, they will charge a fee to do this and this varies from bank to bank.

If you look at refinancing to another bank you may have exit costs to get out if you have only had your home loan for a year. When refinancing you need to look at the overall costs of different interest rates, exit fees etc to see if it is more beneficial in the long run.

Another thing to consider with fixed rates is extra repayments, make sure that your bank will allow some additional payments, some do not and if they do allow additional, find out how much extra can you pay without penalty. Most banks will not allow redraw however there are some out there who do hence you have the best of both worlds. You know exactly what your repayments will be and can redraw if necessary.

I hope that I have been of some assistance to you with this information, you are welcome to PM me if you require any further assistance, or rate information.:babydust2: