What is a fixed-term home loan?

A fixed-term home loan is a mortgage option where the interest rate is locked in for a set amount of time. This fixed rate period is usually between one and five years. If you take out a fixed-term home loan, your mortgage repayments will not change during the duration you have the fixed rate, regardless of whether interest rates are rising or falling.

Home loan repayments on a fixed-rate loan can include either principal and interest or interest only . Typically interest only payments are used by customers when the loan purpose is for investment. The principal part of your repayment is the portion of money you’ve borrowed from the bank for your home payment, while interest is the fee charged by the bank to lend this money.

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