A fixed interest rate mortgage

Robert and Kim are on fixed salaries, and they never get bonuses or overtime payments. They know money will be a bit tight in the first few years of their home loan.

They decide to take a loan with 80 percent borrowed at a fixed interest rate for two years and the balance at a floating rate. Having so much at a fixed rate will help with their budgeting, while the small amount at the floating rate will allow them to increase their payments at no cost if either of them gets a higher-paying job.

They looked at a revolving credit mortgage which friends had recommended, but Robert and Kim decided that they didn't need that amount of flexibility. They also felt that they might not have the discipline to cope with an eftpos card which would let them spend up to the whole amount of the credit available on the loan.