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Loan Term vs Fixed Term - What's the difference?

Adam explains the difference between a 'loan term' and a 'fixed term' and breaks down the jargon.  Watch the video and check out the examples below to learn more. 

Loan Term

This is the length of time allocated to repay the loan

The longer the term, the lower the payments. In turn, the shorter your loan term is, the higher the repayments.

For example:

  • $500K - 30 year loan term - 2.5% interest rate = repayments of $910/fortnight 
  • $500K - 20 year loan term - 2.5% interest rate = repayments of $1200/fortnight 

You can play around with various loan terms on our calculator here

The shorter the loan term, the faster the loan is paid off and ultimately the less interest you will pay on your loan

Fixed Term

This is the amount of time your interest rate is fixed for

You can fix your interest rate for incremental periods of time and the bank offers interest rates at each term.

At the moment those terms are:  

6mths – 12mths – 18mths – 1 year – 2 years – 3 years – 4 years  and 5 years

*Each term will hold a slightly different interest rate

Once you fix your loan at a specific rate, you are committing to that rate for the chosen period of time and when that term runs up you will get to decide again how long you would like to fix your loan for.

To give you an idea of how this looks, here are a couple of examples:

  • $500K – Over 30 years – Fixed for 1 year at 2.5% = $911/fortnight
  • $500K – Over 30 years – Fixed for 3 years at 2.8% = $948/fortnight

Both of these examples use a 30-year loan term, but different fixed terms

As advisors we are here to help you choose the best interest rate and loan term to fit your needs and goals. We are always happy to help chat through the pros and cons to shorter or longer loan terms and different fixed terms and rates. Contact the team at My Mortgage to find out more or to see what we can do for you.  


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