Fixed Rate Home Loans – The Monzi A to Z

Fixed rate home loans lock in your mortgage repayments. After all, your repayments stay the same during the fixed-rate period. Is this right for you? Should you choose a fixed or variable interest rate? Monzi’s here to give you the low-down; let’s go!

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What are fixed rate home loans?

Fixed rate home loans really are as simple as it gets. Obviously, a home loan is a loan that you can use to purchase a house, while the fixed rate refers to your interest rate. As it is fixed, it won’t change over the course of your repayment term.

The benefits of a fixed rate are clear. If you know what your interest rate will be, then you can calculate with certainty what your repayments and total loan cost will be. That can make budgeting so much easier.

While that provides an overview, there’s so much more to fixed rate loans. Read on to find out if they may be the right home-buying finance choice for you.

What are the best fixed rate home loans?

The best fixed rate home loan is the one that works for your financial situation. Obviously, as part of this, you will be looking for a few things.

First, you may want to consider finding the lowest possible interest rate. This will minimise your interest payments to ensure you can maximise your principal repayment. A lower rate helps you save money on a home loan.

In addition to this, you’ll be looking for a repayment term that suits your budget. If the terms on offer are too short, the associated repayments may overextend your budget. On the other hand, if they’re too long, you might feel like you’re stuck making repayments forever.

Ultimately, the best fixed rate home loan will be the one that you can repay efficiently while still ensuring your repayments suit your budget.

How do I compare fixed rate home loans?

A home loan is often the largest financial commitment that you will make in your life, so, don’t treat it lightly. Do your research, seek guidance and don’t agree to a loan until you are absolutely sure that it’s right for you.

A key step in this is to compare the home loans on offer. Finding the right deal can save you thousands over a 20-30 year period, so it pays to do your research.

If you’re not sure what to undertake a fixed rate loan comparison, consider the following:

  • The interest rate: while a small difference may not seem like much, over the long-term it could result in thousands of dollars of savings.
  • Comparison rate: combines your interest rates and fees to give you one single figure that represents your total loan cost.
  • Fixed vs variable interest rate?
  • Loan term: how long will you be making repayments for?
  • Key features: may include offset accounts, redraws or refinancing options.

For further details, Moneysmart has provided a handy breakdown on selecting the right home loan.

Lowest fixed rate home loans

As a general rule, low rate home loans are usually offered to those borrowers who have a good credit history and are in secure financial positions. After all, they’re the most likely to repay their loan on time and without any issues. Unfortunately though, we are unable to say exactly what the lowest rate may be.

In any case, if you currently hold a home loan and want to access a lower rate, it never hurts to ask your lender. However, ensure you go in prepared. Find out the rates offered by other lenders and use this to justify your position. A reduction of even fraction of a percent (e.g. 4.6% to 4.3%) can save you potentially save you thousands.

If they are unwilling to work with you then consider refinancing with a different lender if you can get a better deal. However, evaluate the pros and cons and associated costs (e.g. exit fees) before taking this step.

Consider getting in contact with a financial adviser before making a decision.

5 year fixed rate home loans explained

One common loan product that you’ll encounter is what’s known as a 5 year fixed rate home loan. While this seems like a loan with a five year repayment term, that’s not quite the case.

Instead, with fixed rate home loans 5 years your interest rate is locked in for five years. However, once this period has elapsed, your rate will revert to a variable interest rate that fluctuates based on the cash rate for the remainder of your loan term.

The benefit of this is that for the initial five year period, you can budget and account for what your repayments will be with certainty. However, the downside includes reduced flexibility as well as certain limits on additional payments and offset accounts.

Is a 2 or 5 year fixed rate home loan better?

This comes down to your preferences. Most lenders will offer 2, 3 or 5 year fixed periods. As a result, you will likely need to compare 3 year fixed rate home loans with the 2 and 5 year options to determine the right choice for you. Alternatively, you can opt not to fix the rate at all.

As a guide, the longer your fixed rate period, the higher your premium will be (i.e. it will cost you more). However, this comes with the trade off that a fixed interest rate provides security and certainty regarding your interest rate.

Other potential considerations include:

  • Predicted interest rate changes
  • If you foresee a change in your future circumstances.
  • Your future capacity to make additional repayments that may not be an option with a fixed term.
  • Re-financing options.

Is a fixed rate best for mortgages?

Typically, no.

Research has consistently found that, over the course of a home loan, variable rates are more likely to be the cheaper option. However, in saying this, this will not always hold true. After all, unfavourable rate changes can significantly increase a borrower’s interest payments.

In addition to this, the security of a fixed rate can be appealing. While it may cost you in the long-run, there’s something comforting and practical about knowing exactly what your repayments will be each month.

Ultimately though, it’s in your hands to determine which option is right for your circumstances.

Who offers fixed rate home loans Australia?

In Australia, there’s no shortage of lenders willing to offer home loans. This not only includes your traditional banks but a range of specialist mortgage lenders and online credit providers too.

Given that you’re spoilt for choice, it makes sense to shop around. Simply settling for the first loan that you are offered may cost you money directly in the long-run.

While we’ve already outlined a few comparison points, don’t be afraid to seek professional guidance. There are plenty of financial services out there that may be able to help you secure the right home loan.

Interest only fixed rate home loans: what are they?

Home loan repayments consist of two components: the principal and the interest.

However, with an interest only loan, you only repay the interest for an agreed time period. Once the period has elapsed, the loan will then revert to the typical principal and interest structure.

Without context, this seems like a curious option. However, they are useful in a few situations.

In short, they may be a useful short-term option as either bridging finance or as a construction loan.

How can I get a home loan with low income?

Low income earners will typically find it difficult to access home loans. Moreover, more often than not, it may make little financial sense for these individuals to buy a home.

In any case, in order to be considered, you will need to prove that you are in a solid financial position and earning a regular income (albeit a low one). Put differently, you must display the capacity to make your repayments.

In addition to this, you will likely need to have a good credit score and solid borrowing history. Lenders are potentially allowing you to borrow upwards of $100,000. That’s no small sum. As a result, they want to be absolutely certain that you’re trustworthy and reliable.

Even given this, approval is not certain. Lenders will conduct a thorough assessment to determine your suitability for credit. From this, you will receive an outcome.

How long can you have home loans for?

This will depend on your home loan amount as well as your bank or lender. Usually, the maximum term offered will be 40 years. However, it may be possible to find some loans which exceed this.

As a guide, most lenders will offer 10, 15, 20, 25, 30 and 40 year mortgage terms. So, try to find the one that best suits your situation.

Fixed rate home loan suburban street blue skies

Is 3.75% a good mortgage rate?

In short, we cannot say.

Your interest rate is based on a number of factors so without knowledge of this information, it is not possible to determine what a good rate may be.

If you are unsure, try to compare a range of different lenders and the rates they offer on similar mortgage products. That way, you get an idea of whether the rate is competitive or if you could get a better deal with a different lender.

While a slightly smaller interest rate may not seem like much, over the course of a 20, 30 or 40 year mortgage, you could see big savings. As a result, try to find the right deal.

How long should I have a mortgage for?

This is up to you. Typically, lenders will offer mortgages with repayment terms ranging from 15 to 40 years in five year blocks (e.g. 25 years). As a result, you will have to make the decision.

Obviously, with a shorter repayment term, you will be out of debt faster. Although, your regular repayments will be larger.

On the other hand, a longer repayment period will mean that your repayments may be more affordable. However, you will be paying off your mortgage for a long time.

At the end of the day, it’s about finding the right balance. Aim to repay your mortgage in an efficient manner while still ensuring that your regular payments fit comfortably with your budget.

Who is the best lender for home loans?

Unfortunately, Monzi is unable to say. After all, we’re simply here to provide you with all the information you need to know about fixed rate loans.

At the end of the day, it’s up to you to do your research and compare loans and lenders based on the information we’ve outlined above. Find the best rate and repayment term that works for you. That will give you the best chance to pay off your home loan on time and in full.

For most people, a mortgage will be the largest financial commitment they make in their life. As a result, it’s crucial to put in the time and effort to determine if the product is right for you.

Monzi and fixed rate home loans

At Monzi, we’re not able to offer home loans. As a result, you will need to contact a bank or mortgage lender to help you finance the purchase of your new home.

However, what we can offer instead is a simple and easy lender-finder service. Through this, you can potentially match with lenders offering personal loans ranging from $300 to $10,000.

While obviously this won’t cover the cost of a house, these loans can cover most personal expenses. All it takes is one application and our automated system will attempt to pair you with an available lender from our network.

Personal loanAmount (AUD $)TermSecurity
Small loan$300 to $2,000Up to 12 monthsUnsecured
Medium loan$2,001 to $4,60013 to 24 monthsSecured
Large loan$5,000 to $10,00013 to 24 monthsSecured

Note: repayment terms may vary between lenders.

Does that sound like something that’s right for you? Scroll up and use Monzi’s loan slider to begin your application today.

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Factor In

Costs

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You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000

Terms

12 months

Costs

20% upfront establishment fee

+ 4% monthly fee

Example

Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600

Terms

13 months

24 months

Costs

48% annual percantage rate

67.41% comparison rate p.a.

Example

Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000

Terms

13 months

24 months

Costs

21.24% annual percantage rate

48% comparison rate p.a.

Example

Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.