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Rates and Repayments

Negotiating various terms of a loan including rates and repayment options can be complicated. We recommend discussing with a broker so that you are equipped with all the information before making a decision. Here’s a brief breakdown of the options you will come across:

Principal and Interest loans

You pay interest and also repay part of the amount borrowed (principal) at the same time. Your loan will come with a specified term in which is to be paid.

Pros:

  • Higher borrowing power
  • Reduced interest rates
  • Potential to pay off the mortgage faster
  • More flexibility to refinance

Interest-only loans

You pay only the interest for some or all of the term, with principal balance unchanged during the interest-only period.

Pros:

  • Maximise cash flow with an investment property
  • Leverage funds for a business investment
  • Covering temporary shortfall in income
  • Retirement planning

Fixed interest rate 

A fixed interest rate loan is where the interest charged on your loan will remain fixed for a certain number of years, depending on how long you fix for.

Pros:

  • Provides certainty
  • Ability to plan ahead and stick to an accurate budget
  • Works to your advantage if you are locking in a low interest rate

Variable interest rate 

Pros:

  • More flexibility and freedom
  • Opportunity to reduce loan balance, allowing you to save substantial amounts of money over the loan term
  • If interest rates go down, so will the amount of interest you are charged with monthly

If you have any questions, we’re happy to have a non-obligatory chat with you. Feel free to give us a call or fill in the form here and we will organise a time to call when suits you.

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