Stay Variable or Fix my Home Loan Rate?

This is the most commonly asked question today regarding home loans… If we look at the average 3 year fixed rate at 6.79% (loans over $250,000 receiving a 20pt discount) and then the current average discounted variable rate at 5.11% for P&I payments for a loan of $250,000, the variable monthly repayment would be $1360 approx. The fixed monthly repayment would be $1630 approx. Therefore, an extra $270 is required.
Often the question then arises if the extra payment is better off used in the principal payment? An option then could be to pay the higher amount (3 year fixed rate payment) and leave the loan on a variable rate. The principal balance should then be reduced and also provide additional funds in redraw. At the end of 3 years with the interest rate rises being chronologically consistent, the variable rate would need to be 8.4% approx (monthly/annual fees have not been included).

7 Things You Need to Know When Purchasing a Home

Stamp Duty: A government cost calculated on purchase price. First home buyers are exempt up to a purchase of $500,000. If building you only pay on the land cost.

Mortgage Insurance: A deposit of 20% or more is required so as not to have to pay Mortgage Insurance to lenders.

Building Insurance: The building, not the land, needs to be insured prior to settlement of the purchase.

Fixed Loan Rate: Penalty fees may be issued if paying loan off in lump sums, making higher repayments or paying off in full before its due date.

Discounted Variable Rate: This rate may only last for a period of one, two or three years and then will revert back the standard variable rate.

Split Loan: Your loan may be part fixed and part variable and some lenders do charge fees for set-up, accounts & discharge on both portions.

Conveyancer/Settlement Agent: A Conveyer organises the legal transfer of property title from the seller to the buyer.  A settlement fee will apply as well as other fees including title search.