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What is a fixed rate home loan?

A fixed rate home loan is one where the interest rate is locked in for a certain period (usually 1-5 years). At the end of this period you can either commit to another fixed rate or revert to a variable interest rate. The ‘re-fix’ interest rate will depend on the rates available in the market at that time.

A fixed rate loan is useful for budgeting as your repayments are the same during the fixed term, even if interest rates increase during the fixed term. However, it also means you’ll have to pay the same interest rate (and minimum loan repayments), even if market rates drop during the fixed term. To understand your costs, you can use a budget calculator to see how much you are spending and where. ASIC’s MoneySmart has an online planner to help get you started.

Fixed rate home loans also usually come with fewer features than variable rate loans and you may not be able to pay your loan off early without penalties (‘break costs’). There may also be limits on additional repayments that you can make without penalty. However, Qantas Money Home Loans fixed rate loans come with redraw facilities and the option to include up to six offset accounts. This lets you use your savings to lower the amount of interest you pay and reduce the overall cost of the loan, if you make use of the redraw or offset feature. With a Qantas Money Home Loans fixed rate loan, you will have the ability to make $20,000 in additional repayments (above the minimum) every year without penalty. Plus, there are free redraws for fixed loans.

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