Why Should You Consider Fixed Rates for Your First Home?

Getting Started with Your First Home Loan

If you're a landscaper looking at buying your first home, you've probably heard mates talk about fixed interest rates and variable interest rates. The choice between them can feel overwhelming, especially when you're already juggling quotes, projects, and planning your future. Understanding how fixed rate loans work—and whether you can still make extra repayments—is crucial for your first home buyer budget.

When you're ready to apply for a home loan, you'll discover there are plenty of home loan options available. For tradies in the landscaping industry, having a mortgage broker who understands your income patterns and seasonal work can make all the difference in your first home loan application.

What Exactly Is a Fixed Interest Rate?

A fixed interest rate means your home loan interest rate stays the same for a set period—typically between one to five years. During this time, your repayments won't change, regardless of what happens in the broader economy or with the Reserve Bank's cash rate decisions.

For landscapers, this certainty can be valuable. You know exactly what's coming out of your account each month, making it easier to budget around seasonal fluctuations in work. When you're planning for slower winter months or investing in new equipment, this predictability helps you manage your finances with confidence.

Can You Make Extra Repayments on a Fixed Rate Loan?

Here's where it gets interesting. Most fixed rate loans do allow extra repayments, but there's usually a cap—often around $10,000 to $30,000 per year, depending on your lender. If you exceed this limit, you might face break costs or early repayment fees.

This is different from a variable interest rate loan, which typically allows unlimited extra repayments without penalties. So if you've just finished a big landscaping project and want to throw an extra $50,000 at your mortgage, a fixed rate might not be your ideal option.

Understanding Your First Home Buyer Options

As a first home buyer, you've got several advantages that can help you get into the property market sooner:

1. First Home Loan Deposit Scheme - This government initiative helps eligible first home buyers purchase a property with a 5% deposit without paying Lenders Mortgage Insurance (LMI)
2. Regional First Home Buyer Guarantee - If you're looking at properties in regional areas, this scheme can provide additional support
3. First home owner grants (FHOG) - These vary by state but can provide thousands of dollars towards your purchase
4. First home buyer stamp duty concessions - Potential savings on stamp duty that can significantly reduce your upfront costs
5. First Home Super Saver Scheme - A way to save for your deposit using your super

Understanding your first home buyer eligibility for these schemes is important when planning your deposit strategy. Whether you're considering a 5% deposit, 10% deposit, or even using a gift deposit from family, knowing what's available can change your purchasing power.

The Offset Account vs Redraw Facility Question

When comparing home loan options, you'll come across offset accounts and redraw facilities. Here's the difference:

An offset account is a transaction account linked to your home loan. Any money sitting in this account offsets the interest charged on your loan. If you have a $400,000 mortgage and $20,000 in your offset account, you only pay interest on $380,000.

A redraw facility lets you access extra repayments you've made on your loan. You're still paying down the principal, but you can withdraw those additional payments if needed.

Here's the catch: offset accounts are rarely available with fixed interest rates. Most fixed rate loans only offer a redraw facility, and even then, there are often limits on how much you can redraw and how often.

For landscapers who experience seasonal income variations, this matters. You might prefer the flexibility of a variable interest rate with a full offset account, allowing you to park cash during busy months and draw on it during quieter periods without restrictions.

Low Deposit Options for Landscapers

Many landscapers assume they need a 20% deposit to avoid Lenders Mortgage Insurance (LMI), but that's not always the case. Through the Home Guarantee Scheme and other low deposit options, you might be able to purchase with just a 5% deposit.

Even with a 10% deposit, there are ways to minimise or eliminate LMI, particularly if you're working with a broker who specialises in home loans for landscapers.

Getting Pre-Approval: Your First Home Buyer Checklist

Before you start seriously looking at properties, getting loan pre-approval is essential. This tells you your borrowing capacity and shows sellers you're a serious buyer.

Your first home buyer checklist should include:

• Recent payslips or tax returns (especially important for self-employed landscapers)
• Bank statements from the past three to six months
• Details of any existing debts or financial commitments
• Proof of savings for your deposit
• Identification documents
• Information about the property you're interested in (for full approval)

Having these documents ready speeds up your home loan application and shows lenders you're organised and prepared.

Mixing Fixed and Variable: The Split Loan Strategy

You don't have to choose between fixed and variable interest rates exclusively. Many landscapers benefit from splitting their loan—perhaps 50% fixed and 50% variable.

This approach gives you:

• Stability from the fixed portion with predictable repayments
• Flexibility from the variable portion for unlimited extra repayments
• Access to an offset account on the variable portion
• Protection against interest rate increases on part of your loan
• Potential to benefit from interest rate discounts if rates fall

This strategy can be particularly useful when you have irregular income or want to pay off your mortgage faster without being restricted by fixed rate limitations.

Making Your Decision

Choosing between fixed and variable interest rates—or a combination of both—depends on your personal circumstances, risk tolerance, and financial goals. As a landscaper, your income patterns, business plans, and future earning potential all play a role.

Working with a mortgage broker who understands the trades industry means you get advice tailored to your situation, not just generic information. They can help you find interest rate discounts, understand the fine print on extra repayments, and structure your loan to match your goals.

Whether you're after the security of fixed repayments or the flexibility to pay extra when business is booming, there's a home loan structure that fits your needs. The key is understanding your options before you commit.

Ready to take the next step towards buying your first home? Call one of our team or book an appointment at a time that works for you. We specialise in helping tradies like you find the right home loan options for your unique situation.