Is it the right time to fix your home loan?

With interest rates at an all time low, most home buyers are asking the tough question “should I fix my loan or not?”

Rising interest rates can have a big impact on your lifestyle. And because of this, you should consider your future plans, your budget, and your financial flexibility when deciding whether or not to fix your loan.

A fixed rate home loan allows you to lock in an interest rate for a certain period of time. The most popular term ranges from one to five years. During this period, your interest rates and monthly payments remain the same whether or not lenders change their interest rates. At the end of the fixed term, you have the option to lock in the loan again or switch to a variable rate loan option. Whether you’re new to the home buying business or looking to buy a second home or property, it might be the right time to opt for a fixed rate home loan. Locking in the rate on your home loan is one way to manage risk. If raising interest rates would have a significant impact on your ability to repay your loan, then locking in your rate makes a lot of sense.

However, before making a decision as important as fixing your home loan, there are several factors that you should consider. First, you should look for a lender that offers some flexibility, and you should also ask yourself and perhaps get some advice about how things might turn out three to five years from the time you are considering fixing your loan. Locking in for a shorter period may make more financial sense as you watch market trends.

Do you love certainty? The main advantage of fixed rate home loans is the fact that you can sleep better at night and even plan ahead because you already know what your monthly obligations are. However, one of the disadvantages of going for a fixed-rate home loan is that most lenders won’t let you pay off your loan early or make additional payments without incurring penalties.

If you’re still on the fence, there’s always the option to have your cake and eat it. The split loan option gives you the opportunity to have one part of your loan fixed and the other part subject to a variable rate.

Once you’ve done your homework and decided which type of loan to choose, always remember that if you don’t ask for it, you won’t get it. If you are using a mortgage broker, ask the broker to negotiate for the most flexible option that fits your financial situation.