When you're working FIFO, buying a home involves understanding different Home Loan options that suit your unique financial situation. Two key features that can significantly impact your home loan experience are fixed interest rates and offset accounts. Let's explore how these work and whether they're right for your circumstances.
What Are Fixed Interest Rate Home Loans?
A fixed interest rate home loan locks in your interest rate for a set period, typically between one to five years. During this time, your home loan interest rate won't change, regardless of what happens in the broader property market or with the Reserve Bank's cash rate.
When applying for a home loan, you'll often have the choice between:
• Fixed interest rate options
• Variable home loan rates
• Split loans (part fixed, part variable)
For FIFO workers, fixed interest rate home loans can provide certainty when calculating home loan repayments, which helps with budgeting during your roster cycles.
The Benefits of Fixed Rate Loans for FIFO Workers
Payment Predictability
Fixed rates mean your repayments stay the same throughout the fixed period. This consistency works well with FIFO income patterns, making it easier to manage your finances during both work and break periods.
Protection from Rate Rises
If interest rates increase during your fixed period, your repayments remain unchanged. This protection can save you thousands of dollars over the loan term.
Budgeting Confidence
Knowing exactly what your mortgage repayments will be helps you plan other expenses, from everyday costs to preparing for your next property purchase.
The Drawbacks of Fixed Interest Rates
Missing Out on Rate Drops
If variable interest rates fall below your fixed rate, you won't benefit from lower repayments until your fixed period ends.
Limited Flexibility
Fixed rate loans often come with restrictions on extra repayments. Some lenders allow only small additional payments, which could limit your ability to pay down your loan amount faster.
Break Costs
If you need to exit your fixed rate early through refinancing or selling, you might face significant break costs.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at FIFO Home Loans today.
How Offset Accounts Work with Home Loans
An offset account is a transaction account linked to your home loan. The balance in this account "offsets" against your loan amount when calculating interest. For example, if you have a $500,000 loan and $50,000 in your offset account, you only pay interest on $450,000.
For FIFO workers who often receive large lump sum payments or have irregular income patterns, offset accounts can be particularly valuable. You can deposit your FIFO wages and let them work to reduce your interest costs.
Benefits of Offset Accounts for FIFO Workers
Interest Savings
Every dollar in your offset account reduces the amount you pay in interest. Over time, these savings can be substantial, potentially reducing your loan term by years.
Maintain Access to Funds
Unlike making extra repayments directly to your loan, money in an offset account remains accessible. This flexibility is crucial for FIFO workers who might need quick access to funds.
Tax Advantages for Investment Properties
If you're considering expanding your property portfolio, offset accounts can help maintain the tax deductibility of investment loan interest.
Combining Fixed Rates and Offset Accounts
Traditionally, fixed interest rate home loans didn't come with offset accounts. However, many lenders now offer this combination, though sometimes at a slightly higher interest rate than a basic fixed loan.
When comparing Home Loan options, consider:
• Whether the lender offers offset accounts with fixed rates
• The interest rate difference compared to basic fixed loans
• Your expected offset account balance
• How long you plan to keep the fixed rate
Accessing Home Loan Options Across Australia
FIFO workers can access Home Loan options from banks and lenders across Australia, not just those in your home state. This means you can:
• Compare interest rate discounts from multiple lenders
• Find loans with lower lenders mortgage insurance (LMI) requirements
• Potentially improve your loan to value ratio (LVR) options
Some lenders specialise in mortgages for FIFO workers and understand your unique income structure, which can lead to better loan terms and a more streamlined application process.
Making Your Decision
Choosing between fixed and variable rates, and whether to include an offset account, depends on your:
• Current financial situation
• Risk tolerance
• Expected income over the loan term
• Plans for the property
• Available deposit and potential need for LMI waivers
Before making your Home Loan application, consider getting loan pre-approval to understand your borrowing capacity. This process typically requires recent bank statements and proof of your FIFO income.
The Application Process
When you're ready to apply for a home loan, having the right documentation makes the application process smoother. FIFO workers typically need:
• Employment contracts showing roster patterns
• Bank statements demonstrating regular FIFO income
• Proof of any additional income sources
• Details of your intended property purchase
Working with a mortgage broker who understands FIFO employment can help you access better Home Loan Rates and terms that suit your situation.
Remember, you can often get pre-approved for a loan amount before finding your property, which gives you confidence when buying your first home or making your next property move.
Whether you choose fixed or variable rates, and whether you include an offset account, the key is finding a loan structure that works with your FIFO lifestyle and financial goals. The right combination can help you build home equity more effectively while maintaining the flexibility you need.
Call one of our team or book an appointment at a time that works for you to discuss which home loan features align with your FIFO income and property goals.
