Home loan rates usually feature a variable interest rate, a fixed interest rate or a split interest rate. A fixed home loan rate is obtained for a stipulated period agreed upon by the parties. This allows the borrower to adjust the period immediately the period ends. Alternatively, the borrower has the option of switching to another interest rate. This is usually a variable interest rate.

Unlike a fixed home loan rate, a variable loan rate normally fluctuates depending on the economic, social and political factors affecting the financial industry. In addition, fixed home loan rates are recommended for rigid economic and social conditions. Most fixed rate home loans allow the borrower to make additional repayments towards liquidating the loan. It also features redraw financial facilities.

A fixed home loan rate is usually recommended for a borrower who seeks to carefully plan for a loan repayment. This is because the loan rate enables the borrower to know exactly the amount of funds that will be needed to repay the borrowed funds. Consequently, the home loan rate helps create financial security while at the same time reduces uncertainty.

Unlike a fixed home loan rate, a variable loan rate is flexible as it offers borrowers various financial options. However, this type of loan rate can be risky especially in a financial market with unpredictable interest rates. Therefore, any borrower who wishes to obtain such a loan is advised to plan for the unforeseen future increases in the interest rates.

Unlike a variable home loan rates, a fixed loan rate rarely falls below the set variable rate. In addition, a variable loan rate usually features a wide range of financial options and loan products with low introductory rates for the initial loan period. A variable loan rate does not charge the borrower for making early loan repayments and is thus more commonly obtained by borrowers.

Mel writes about fixed rate home loan, online loans and other finance topics.