There are two standard ANZ Home Loan options: Fixed rate and Floating rate.
They have some similarities like a maximum 30-year term and no monthly fees. But, they have two big differences.
The first difference is the interest rate. Fixed means you lock in an interest rate, for a set time. During that time, your repayment amount stays the same. Floating means your interest rate is not locked in, so it goes up or down in line with market changes, as do your repayment amounts. The Floating rate is typically higher than the Fixed rate.
And that's because of difference two - the flexibility to make extra repayments. If affordable, making extra repayments could help pay off a loan faster and may mean less interest over the life of the loan. With a Floating rate, you have the flexibility to make extra repayments whenever you like, with no extra charges. With a Fixed rate you can make one extra repayment of up to 5% of the current loan amount each year of your Fixed rate period. Any extra and you may be charged Early Repayment Recovery which is the loss we incur if you repay some or all of your loan early during a Fixed rate period. Talk to us first, we can give you indication of the Early Repayment Recovery we’ll charge.
Many customers choose to put the majority or all of their loan on a Fixed rate because the rates have been lower, and they like the certainty of knowing what their repayments will be. They often split their loan across different Fixed rate periods, to try to manage the risk of market changes. Customers who choose to put some of their loan on a Floating rate like the certainty of making regular repayments, but want the flexibility to pay more when they can. They could be expecting some extra money like a bonus that they want to put straight towards their loan.
We know circumstances can change and it’s about what works best for you. The faster you pay off your loan, however, the less you’ll pay in interest over the life of your loan.
And if you really want to focus on paying your home loan off faster there’s one more option.
Watch our video on Flexible Home Loans to find out more…
If you have any questions, talk to us today.