Fixed or variable? Choosing the right home loan

One of the hardest parts of purchasing property is finding the perfect home loan for your situation. After all, with all the different products out there to choose from, it can be overwhelming to decide.

Having a home loan is a commitment that will last for a good part of your lifetime, so it's important to take the time to figure out which one suits you and your lifestyle.

A good place to start when selecting a home loan is to decide whether you need a fixed rate or a variable rate loan.

The main difference between the two is how the interest rate affects the overall nature of your repayments. Naturally, when you're involved with credit products and borrowing money, there will be a degree of interest that needs to be paid on top of your repayments.

A fixed rate home loan is fairly self explanatory. When you take out one of these home loans, the interest rate is set at a fixed level for a certain period of time, usually between three to five years.

On the other hand, a variable rate home loan is less structured and can be affected by a wide range of different factors – most notably, the official cash rate and overall state of the economy.

Depending on your approach to your finances and repayments, either of these types could suit you. As a general rule, fixed rates are better for those looking for security and standard repayments that won't change, making it easier to budget for each week.

Variable rates can be a great option for property investors due to the flexibility of the products, as well as the wide range of different facilities that can be utilised in order to help maximise the returns on the real estate.