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This type of loan is generally used by property investors. Many do not want to pay down the principal of their investment property and rely on capital growth to create equity in the property. The reason many investors use this type of loan is because they know from day one what interest they will be paying on their loan for the duration of the loan period. This assist with cash flows.
Advantages:
- Certainty of repayments
- Useful for long term investments
- Interest rate is usually cheaper than other flexible products
Disadvantages:
- If interest rates fall, your repayments won’t
- Less Flexible Loan
- Fees if you try to repay the loan prior to the end of the fixed period
- Additional repayments may not be allowable |