Fixed Rate Home Loan (FRHL)

June 23, 2015

Fixed loan home loans are just that.  That is, the interest rate will not rise or fall during the fixed rate term.  You can fix the rate anywhere from1 to 10 years.  We strongly advise our clients to carefully consider the pros and cons of FRHL before they opt for this loan type.  The penalties to exit a FRHL early can run into tens of thousands of dollars. 

FRHL’s are currently less flexible that variable loans, i.e.

  • In the main, you are limited in how much you can make in extra repayments – this ranges from an additional extra repayment of $10 000 per annum to $30 000 over the fixed rate term.  We do have one lender that will allow significant additional payments with no penalty.
  • In the main, they do not have a 100% offset feature, although one or two lenders do offer this feature
  • In the main, they do not have the redraw feature, again – one or two lenders do offer this feature
  • Remember the fixed rate you applied for may not be the fixed rate you get when the loan settles.  To guarantee that you get the fixed rate you applied for  you may wish to rate lock your loan

To counteract the draw backs of FRL’s, we suggest the borrower may wish to consider a combo loan- part fixed and part variable. Ask us about our Combo Loans. (please insert link to combo loans here)

FRHL’s are perfect for investment property purchase.

Before making any decisions read this article ‘Think before fixing your interest rate’.

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