In today’s unpredictable interest rate environment, choosing between a fixed or variable interest rate for your loan can be a challenging decision.
A strategy worth considering is splitting your loan between fixed and variable interest rates. This approach can help balance the advantages of both options.
For example, if you have a loan of $1,000,000:
- Refinancing at a 6.13% variable rate could result in approximately $121,178 in interest payments over two years.
- However, splitting the loan—allocating $500,000 to a variable rate and $500,000 to a fixed two-year rate of 5.69%—could reduce the interest cost to $116,773.
This adjustment may save you around $4,400 over the two period.
This strategy can provide flexibility and potential cost savings, but it’s important to weigh the pros and cons based on your financial goals and circumstances.