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Fixed rates vs Variable rates – pros and cons
Fixed rates are at an all time historic low and it could be a good time to consider three to five year fixed rates. But have you always wondered what the pros and cons are of choosing fixed rates over variable rates or vice versa? Here are some considerations for you.. Fixed rates - pros You know exactly how much your weekly, fortnightly, monthly repayments will be for the term of the fixed rate and hence budgeting is easier. When fixed interest rates are low, it makes it favourable. Fixed rates - cons Break costs can be very high - if you want to pay off your loan or move banks, you may end up paying thousands of dollars. There is a limit on how much extra you can contribute during fixed term. Some banks allow $10,000 extra contribution per year (during the fixed term) and some may allow $30,000 during fixed term. This depends on the bank and you need to check it with your lender or your broker. Offset account is usually not a fully offset account - some banks allow partial