2-Year Fixed-Rate Home Loans
Last updated on March 2nd, 2022
Borrowers can take out a home loan at either a variable or at a fixed interest rate. The former involves interest rates that may change based on market performance and economic factors. The latter, which are fixed loans, have interest rates that do not change throughout the loan period. There are advantages, disadvantages, and other features for both variable rate and fixed interest rate home loans. This will tackle 2-year fixed-rate home loans in particular.
What are 2-Year Fixed-Rate Home Loans?
A fixed-rate home loan typically comes in a predetermined number of years. 2-year home loans, of course, have a total loan duration of 2 years.
As with all fixed-rate home loans, the interest for a 2-year fixed home loan is determined beforehand. This means that generally, these loans are low-risk and relatively safe.
What are the Advantages?
2-year fixed home loans have many advantages, some of which include the following:
- Easy planning
Interest rates are predetermined for 2-year fixed-rate home loans, which means that doing a financial map for the next two years is easy. All numbers are already known, and there is little to no variation in the amount to be paid.
- Economy-proof
No matter how the market or the economy performs, fixed interest rates stay the same. So, borrowers need not worry about rising interest rates or paying more than they have to.
- Short commitment requirement
2-year loans require relatively little commitment compared to longer loan durations. This allows the borrower more freedom over financial and property decisions related to the loan.
What are the Disadvantages?
2-year fixed home loans are not without disadvantages. Some of them are:
- Economy-proof
The fixed interest rate being economy-proof is both an advantage and a disadvantage. If interest rates fall, fixed-rate loan borrowers won’t be able to enjoy the low rates.
- Limited options for additional features
Variable-rate loans or ones with longer durations typically allow borrowers to make extra repayments. Redraws are also usually a feature.
Most lenders, however, do not allow extra repayments and redraws on 2-year fixed home loans.
Types of Fixed Home Loans
2-year fixed-rate loans come in many different types. Knowing these types is extremely important in helping one choose which to get:
- Basic: This is a no-frills home loan, with few features with good fees and low rates.
- Package: These typically have low rates but may come with annual fees to compensate. Other products are also usually featured alongside the home loan itself.
- Full-featured: These have features typically not found in fixed home loans, like extra repayments or redraws.
- Bad credit: Some lenders allow those with a low credit rating to take out a loan. However, the features may not be the best for this loan type.
- Low/No doc loan: Most lenders require a full set of documents (employment, mortgage, etc.) from borrowers. In the case of a low or no-doc loan, those with limited documents can still borrow.
What’s the Best Way of Comparing 2-year Fixed-Rate Home Loans?
These loans can vary across lenders. As such, it’s best to compare these loans before taking one out. Some of the most important factors to consider are:
- Total expenses
Many 2-year fixed-rate loans are associated with higher fees. To make up for this, be sure to compare between lenders’ offers to maximise possible savings.
Also, be aware that loans don’t just involve the principal and the interest. Lenders may also have charges for other processes, so be sure to check these beforehand.
- Interest and revert rate:
Interest rates can significantly vary across different lenders. A lower interest rate, of course, is more favourable. Be sure to also check the revert rate if it’s also low enough.
Find the Best 2-Year Fixed-Rate Home Loans for Your Needs
As we’ve mentioned, offers for these fixed interest rate loans can vary from one lender to another. As such, it would be best to find a way of comparing offers easily.
A comparison site like Makes Cents in Australia can help. Seeing these offers side-by-side is a great way of letting you choose. Try out our specially designed comparison tool today.
