Variable rates
- The upside. Usually full access to offset accounts, unlimited extra repayments and no break costs if you sell or refinance.
- The downside. Your repayments rise and fall with rates, so your budget needs some room.
Fixed rates
- The upside. Your repayments are locked in for the fixed term, usually one to five years.
- The downside. Many lenders cap extra repayments, often around $10,000 a year, limit or exclude offset accounts and charge break costs if you exit early. If rates fall, you don't benefit.
Split loans
A split loan divides your loan into a fixed part and a variable part. The fixed part gives you certainty on most of your repayment, while the variable part keeps your offset and extra repayments working. The split doesn't have to be 50/50.
Break costs
If you repay or refinance a fixed loan early, the lender may charge a break cost to cover its loss. It depends on how rates have moved since you fixed and how long is left, and it can be large. I'll always get the figure before you decide.
When your fixed rate ends
The loan usually rolls onto the lender's standard variable rate, which is often higher than what new customers are offered. Put the date in your calendar and talk to me a couple of months before. It's one of the easiest times to save.
Questions people ask
Is it better to fix or go variable?
It depends on how much certainty you need, whether you plan to make extra repayments or sell, and how much you value an offset. Many people split the loan.
What is a split home loan?
A loan divided into fixed and variable portions, each with its own rate and features.
Can I have an offset on a fixed loan?
Some lenders allow it, many don't or limit it. A split loan keeps the offset on the variable part.
What happens when my fixed rate ends?
It usually reverts to a variable rate that's higher than new customer rates. That's the time to review.
