Should I take a fixed rate loan? 

Fixed rate home loan consists of fixed interest rates that do not fluctuate during the period that you are locked in at. The rates remain the same despite the changes in economy and market conditions.

There are 3 points to take note of when taking up a fixed rate home loan:

1. Fixed rate home loans usually have a higher interest rate than floating rate home loans. However, since floating rates fluctuate and are subject to change according to the market condition, there are times when fixed rates would be cheaper.
2. If you are able to plan your budget well, taking up a fixed rate home loan would be a better choice as the amount of payment can always be anticipated.
3. When taking up a variable/floating loan, you will have to keep track on the market conditions as well as SIBOR.

It is possible to adjust the rate on a fixed rate home loan by refinancing your home loan to obtain a lower interest rate when a bank offers one. However, there are fees involved with changing your home loan and they include prepayment penalties and/or redemption fees of up to $300-500 should you refinance before the lock-in period is over. Legal fee is also involved when you cross over to another bank for refinancing. These fees sometimes outweigh the costs saved on trying to get the lower interest rate package.

The amount of time taken to repay your fixed rate home loan depends on the maximum loan tenure that the bank allows you to take. On most cases, it would be 30 years or up til you are 65 years old. Eventually, it comes down to whether you want to have a stable monthly payment for the first few years by applying for a fixed rate home loan or would want to take chances on playing the market and apply for a variable rate home loan. The choice is yours.