1 Year Fixed-Rate Home Loans
Last updated on March 2nd, 2022
Home loans come at either a variable or a fixed rate. Variable interest rates change regularly, while fixed-rate home loans have static interest rates throughout the mortgage period. This will discuss 1-year fixed-rate home loans.
What is a 1-year Fixed-rate Home Loan?
As the name implies, a 1-year fixed-rate home loan has an unchanging interest rate throughout the loan’s duration. In this case, it’s one entire year.
Generally, fixed-rate loans are safer than variable loans since there’s no risk of interest rates going up. In addition, no matter how economic conditions go, overpaying will never occur for a fixed-rate loan.
What are the Advantages of 1-year fixed-rate home loans?
1-year fixed-rate home loans are excellent and come with many advantages. Some of these include the following:
- Safe from soaring rates
Even if interest rates increase across the board, those in a fixed-rate home loan are safe. This is because the interest rate they start with is the fixed interest rate that sticks until the end.
- No missing out on low-interest rates
A 1-year fixed-rate loan is among the shortest home loan durations available. As a result, even if general interest rates fall, those in a 1-year loan don’t miss out on much. Once the duration ends, the borrower can take out a new loan and enjoy the benefits of the low rates.
- Predictable
As was mentioned earlier, these loans are extremely predictable. The total amount to be paid is computable from the beginning, which makes managing one’s finances much easier.
What are the Setbacks of 1-year Fixed-rate Home Loans?
While a 1-year fixed home loan may seem perfect, it’s not without disadvantages. Some of the downsides of these loans include the following:
- May have limited features for extra payments
Other loan types allow borrowers to make extra repayments that count toward paying off the loan. This is usually not a feature that’s available in fixed-rate home loans. All repayments are also fixed and doable at predetermined times.
Another feature that is also unavailable for fixed loans is a redraw. Redraws allow the borrower to withdraw any extra repayments already made. Since repayments usually aren’t allowed, redraws naturally aren’t, too.
- Borrowers don’t always save
In times when interest rates are at a decline, a fixed-rate loan can be disadvantageous. This is because the downward trend of interest rates can cause a borrower more. As such, it’s wise to check recent market trends before taking out a loan.
What’s the Best Way of Comparing These Loans?
Offers for 1-year fixed-rate loans can significantly vary. As such, there are a few factors to consider when deciding on which one to get. Some of the most important considerations include:
- Check the total expenses.
Home loans involve more than just the fixed interest rate. Other expenses need to be shouldered. Examples of these include legal fees, account fees, establishment fees, application fees, and the like. Be sure to compare the fees for different lenders.
- Compare fixed interest rates.
This is one of the most important factors to consider. Fixed interest rates for a 1-year home loan will vary from lender to lender. So, go for one that has manageable interest rates.
- Check payment features and other extras.
While payment features are limited for most fixed-rate home loans, it does not apply to all lenders. Some will allow extra repayments and redraws. Be sure to check for these features before deciding.
Compare 1-Year Fixed-Rate Home Loans Today.
Different lenders have different offers for these loans. As such, it would be wise to consider multiple offers and pick the best one from them. Check out your options here at Makes Cents – where we have made comparing numerous deals side-by-side easy and convenient for you. Browse through our website today!
