Normally a fixed rate home loan does not come with an offset account so you would have to split a portion of your loan to a variable rate loan to take advantage of this. However, there are some lenders that offer a 100% offset account even on their fixed rate home loan products. This allows you to have your money work for you to save on the interest charges whilst giving you the certainty of repayments and protection from future rate rises.
Fixed rate loans provide certainty with your loan repayments. Since your interest rate will not change for the duration of your fixed rate term, you know exactly how much you will need to pay each month without having to worry about interest rates going up and your loan repayment changing.
Fixed rate loans protect you in a rising interest rate market.
Option to lock in your rate for up to 90 days. Your interest rates are subject to change and is not guaranteed until the day of your settlement. So, if the rate happens to change just before your settlement, your loan will settle on the new rate. Especially in a rising interest rate market, this option comes handy as you will have guaranteed rates for up to 90 days. There is a fee to do rate lock and this is dependent on the lender. Some lenders charge between 0.10 to 0.15% of the loan amount whilst some lenders might have a fixed fee between $300 to $800.
100% offset account without needing to split loan.
A client is looking for a home loan that can offer certainty of repayments as they are quite risk adverse and they state that they don’t want a variable rate loan as they believe interest rates will continue to rise. They want to be able to finish paying off the loan as quickly as possible without incurring any break cost.
Solution: Fixed rate home loan that will give them the certainty of repayments as well as protection against future rate rises and with the lender that offers a 100% offset account, they can move their money into the offset account to save on the overall interest charges and help the client finish paying off the loan sooner.
No, you do not have to do a split loan. You can have a single fixed rate loan account linked to a 100% offset account.
Break costs are unascertainable as it is dependent on the difference in the wholesale rates between the time when you applied for the loan and when your loan is repaid.
Each lender has their own formula when calculating the break cost so it is recommended that you contact your lender prior to paying out the loan or if you want to make a lump sum payment into the loan.
Generally, lenders offer fixed rate terms between 1 to 5 years however there are lenders that offer longer terms as well.
Once your fixed rate period ends, your loan will automatically revert to a variable rate loan based on the standard rate at that point in time less any discount mentioned in the loan agreement (if applicable). It is recommended that you or your broker contact the bank/lender prior to the fixed rate expiry to negotiate for your best rates as well as reviewing your options to ensure you are on a suitable product based on your needs and requirements.
Cerulean Finance Pty Ltd Trading As Kaleido Loans is a credit representative (494551) of Mortgage Specialist Pty Ltd ACN 050 601 093 (ACL 387025)
Cerulean Finance Pty Ltd trading as Kaleido Loans ABN 62 606 929 113
Level 4, 18 Flour Mill Way, Summer Hill NSW 2130
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