Now that interest rates are well and truly on the rise, many people are probably wondering whether they should fix their home loan rate now. There are several benefits worth considering when deciding if a fixed rate mortgage is right to you. Unfortunately like many things in life, for every advantage, there seems to be a disadvantage. Consider these pros and cons before jumping into a loan you'll be paying for the next 15 to 30 years.

Whichever mortgage type you choose, it is essential that you get all the information you can, and seek professional assistance to help you choose which the most suitable type of loan is for you. Below we have set out some fixed rate mortgages pros and cons for you to consider.

There can be several benefits to obtaining a fixed rate mortgage. The first and most appealing benefit for many people is the fact that the interest rate and monthly payments remain constant. With a fixed-rate mortgage, you would be protected from fluctuations in interest rate increases. You know exactly how much money you will need each month to fulfil your mortgage.

For those with a little bit of slack in their budget a good compromise is the split loan where one portion is fixed and the other variable. This way you receive part of the advantage in rate movements whether they rise or fall.  

Investors have used fixed loans for years because they prefer to know what their expenses are up front and they don't require any special features.

If interest rates fall it is often possible to discharge a fixed rate loan early but only by paying a significant penalty. It pays to check out how these break costs are structured before you take out the loan.

If your circumstances change and you require a different type of loan then you are up for break costs as already mentioned.

Fixed loans often lack the flexible features of variable loans. For example making extra repayments off the principal is often discouraged through the use of prepayment penalties. A redraw facility, offset account and shorter repayment periods are often not available. Interest rates on fixed-rate loans are usually higher than starting rates on variable rate loans.

Whatever type of mortgage you choose, it is essential to get as much quality information as you can find from a well-trained and respected at broker. You need to be fully aware of fixed rate mortgages, pros and cons as a mortgage is a big commitment and needs to be very carefully considered no matter what type of mortgage you are interested in.

Another strategy for saving money and avoiding the trap of fixing at a higher rate than the current standard variable is to just throw extra money on top of your repayments instead, and keep it on a variable rate. Paying extra into the loan will assist in paying the loan off faster and you have already prepared yourself for potential increases.

Most lenders with standard variable loans will discount the rate by at least 40 basis points and any good broker will be able to negotiate that on behalf of the customer.

The more you're borrowing and the better your financial situation, the more likely you'll be able to negotiate a larger discount.

With managing your home or investment loan it is important to check your statements regularly to make sure your loan is on the best possible rate.

Readers wanting more information on whether to fix or stay variable or what strategy best fits their needs can either call me on 0411 528 440 or email me at suzy@bestfitfinance.com.au