When your home loan is registered, you have the option to keep a variable interest rate or apply for fixed interest rate. Understanding the difference between the two will help you decide which option is best suited to your needs.
Where do interest rates come from?
The interest rate on your home loan is linked to the prime lending rate, which can change. A variable interest rate changes with the prime lending rate, while a fixed interest rate stays the same for a specific period for which it has been granted.
Variable interest rate
Fixed interest rate
Which is better for you?
This is entirely up to you and your circumstances. Look at the two different interest options then think about your needs and what you can and will be able to afford. A fixed rate allows you to plan with your home loan repayments. A variable rate means you could either save or you could pay more. Like all things financial the best thing to do is gather as much information as you can, plan your outlook realistically and don’t be scared to get some extra advice!
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