Variable vs Fixed Home Loans – Which one is right for me?



Should I fix my home loan or leave it variable?

The age old question – should I fix or remain variable? It’s proved challenging for consumers to decide, but let’s set out some of key differences to make the choice easier.

1. Flexibility

If you’re looking to make additional repayments on your home loan, most variable rate home loan products allow you make additional repayments without penalty. However with a fixed rate home loan, you’re usually limited to a fixed dollar amount of repayments over the course of fixed period. For example, some lenders may only allow up to $10,000 worth of additional repayments per year, or a set amount of additional repayments. Variable home loans however allow for greater flexibility, allowing you to make additional repayments at any time (typically with no limit). So for example, lets say you received a handsome bonus at work, you’ll be able to put that onto your home loan, with no penalty.

2. What happens after the fixed rate expires? 

This is where a lot of consumers are typically caught unawares to what happens next. Say if you fixed your home loan for a period of 3 years, a lot can happen in that time; rates may change, lenders products can be discontinued, and what’s known as the revert-rate is typically applied after the fixed rate expires. The revert-rate is typically the standard variable rate that particular lender offers, which could higher or lower than the initial fixed rate you received. Consumers need to be savvy about talking to the lender 3 months before their product is set to expire to ensure they’re placed on the most approximate product after expiry.

3. Features – What do fixed rates have, what don’t they have? 

Fixed rate home loans come with less flexibility, but more certainty of repayments. One feature they typically lack is an offset account. These accounts allow you to “offset” money sitting your everyday account against your home loan. Most fixed rates don’t have this feature, but some do allow you to have what’s known as a limited offset – allowing you offset 40% of the funds sitting in your offset account.

4. Can I sell my property when I’m on a fixed rate home loan? 

The short answer is yes you can, however there may be penalties of breaking your fixed rate – these sometimes can be quite significant. The rule of thumb is the shorter the time frame you have left on your fixed rate home loan, the lower the exit fee will be. Variable rates on the other hand are flexible and don’t have these type of break costs.


Tips when choosing a fixed rate loan

    1. Try and find a fix rate that isn’t too restrictive on making additional repayments.


    1. Make a reasonable judgement into the future to see if your circumstances may change where you might have to break your fixed rate loan.


  1. Make sure you select the most appropriate time frame to fix – 5 years may be too long, 1 year may be too short.

For more help and assistance in getting or switching your home loan call 1300 307 155 to get assistance from our money saving experts at