A fixed interest rate locks in your repayments, and the price is less flexibility.
If you are an ambulance officer buying your first home, the decision is how much of your loan to fix, if any. Your pay can move with rosters, overtime and allowances, so certainty is attractive. Flexibility matters too, because life as a first home buyer rarely stays still.
Should a First Home Buyer Fix Their Interest Rate?
Fixing suits first home buyers who need repayments they can plan around, and the trade-off is less room to change course. A fixed interest rate stays the same for the agreed term. A variable interest rate can rise or fall at your lender's discretion.
If your household budget is tight, knowing the exact repayment each month makes planning easier. If your budget has some buffer, a variable rate may suit you, because you are not locked into a fixed term. Either way, it is worth reviewing the home loan options for ambulance officers with someone who understands how your income is structured.
Fixed Rate Pros and Cons for Ambulance Officers
The main advantage of a fixed rate is predictable repayments, and the main disadvantages are limited flexibility and possible fees for leaving early.
On the plus side, you can budget around a set figure even if the market moves against you. That helps if you are building a buffer for shift-to-shift income changes.
On the downside, you will not benefit if rates fall during your fixed term. Some lenders also restrict extra repayments on fixed loans, and an offset account or redraw facility may not be available on the fixed portion. Features differ between lenders, so check each one against your plans before you commit. How a lender treats shift allowances and overtime in its assessment also varies, so raise it early.
Fixed Rate Break Costs: How the Calculation Works
Break costs are a fee a lender may charge if you repay or refinance a fixed loan before the term ends. The amount depends on your lender, how much of the term remains and how rates have moved since you fixed.
Because the fee can be large, ask your lender for the break cost method in writing before you sign. A sale, a move or a refinance all count as leaving early. If your job might take you to a new station or region within the fixed term, weigh that risk carefully. When the term does finish, the fixed rate expiry calculator shows what your repayments could look like next.
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Splitting Your Loan: A Worked Example
Splitting your loan lets you fix part of it for certainty and keep the rest variable for flexibility. The trade-off is that you manage two rates, and only the variable part can move.
As an example, consider an ambulance officer with a $500,000 loan over 30 years. Their roster brings regular overtime, but it is not guaranteed each fortnight. They fix $250,000 and keep $250,000 variable.
Using an illustrative rate of 6.75% p.a. on both portions, each half has a repayment of about $1,621 a month, which makes about $3,243 for the whole loan. The fixed half stays at that figure for the term. On the variable half, the rate can change, so the repayment may rise or fall.
The outcome is that half of their repayment is locked in. They can direct overtime pay at the variable portion, subject to the lender's terms. They should confirm in advance whether that portion has an offset account or redraw. If rates rose, only the variable half would move. If they needed to sell early, break costs would apply only to the fixed half. This is an illustration only. Your actual repayments will depend on your lender, rate and loan size. The borrowing capacity calculator is a useful starting point.
Can You Fix a Loan Under the 5% Deposit Scheme?
Whether you can fix a loan under the 5% Deposit Scheme depends on the participating lender, so ask before you apply. Applications go through a participating lender and cannot be made directly with Housing Australia.
The scheme lets eligible first home buyers purchase with a 5% deposit without paying lenders mortgage insurance. The buyer must move in within six months of settlement and keep living there while the government backing is active. If they do not, the lender may require them to pay LMI. Price caps also apply, based on the property's location. You can read more about the 5% Deposit Scheme for paramedics. Check that your preferred loan features are offered with your chosen lender before you commit.
Matching the Fixed Term to Your Plans
The right fixed term is one that ends after your finances settle and before your life is likely to change. Think about whether you plan to start a family, change roles or relocate, because each could trigger break costs if you exit early.
Get loan pre-approval before you start house hunting, and ask the lender to quote both fixed and variable options for your situation. Then you can compare the repayments and the exit costs side by side.
If you are ready to talk it through, call one of our team or book an appointment at a time that works for you. We can help ambulance officers compare fixed, variable and split loans. For a wider look at the process, start with our guide to buying your first home.
Frequently Asked Questions
Is a fixed interest rate a good idea for a first home buyer?
It can be if you need predictable repayments. The trade-off is less flexibility, and you may face break costs if you repay or refinance early.
What are break costs on a fixed rate loan?
Break costs are a fee a lender may charge if you leave a fixed loan before the term ends. The amount depends on your lender, the time remaining and how rates have moved.
Can I split my home loan between fixed and variable?
Many borrowers split a loan to get some certainty and some flexibility. Ask your lender which features, such as an offset account or redraw, apply to each portion.
Can I get a fixed rate with the 5% Deposit Scheme?
That depends on the participating lender you apply through. Ask which loan features they offer under the scheme before you apply.
