17/02/2023
With most mortgage loans, the bulk of the interest is paid in the early years of the loan. This is because the interest is calculated based on the outstanding balance of the loan, and in the early years, the outstanding balance is still relatively high.
This is something to keep in mind when considering a fixed-rate loan with a short term, such as a two-year fixed loan. While a short-term fixed loan may offer a lower interest rate initially, the interest rate could increase significantly once the fixed period ends. And if you decide to refinance or sell your home before the fixed period ends, you could be hit with significant break fees or penalties.
In contrast, a variable-rate loan may offer more flexibility and fewer fees. With a variable-rate loan, the interest rate can fluctuate up or down over time, which means your mortgage repayments could increase or decrease. However, many variable-rate loans offer features such as redraw facilities, offset accounts, and no penalties for early repayments or refinancing, which can help you save money in the long run.
Ultimately, the choice between a fixed-rate loan and a variable-rate loan will depend on your individual circumstances and preferences. It's important to carefully consider the features, fees, and terms of each loan option and to seek professional advice if you're unsure about which option is best for you.
