The easiest way to lock in your fixed rate term

Fixed rate loan terms usually range from one to five years. The term you choose determines how long your interest rate stays locked and how long before you need to decide what comes next.

Early childhood educators often value certainty in their budgeting, and a fixed rate delivers that for a set period. But picking the right term length matters because a longer fixed period offers more stability while a shorter one gives you more flexibility to refinance or adjust your loan sooner.

How fixed rate loan terms work

A fixed rate loan term is the period during which your interest rate stays the same. Most lenders offer terms of one, two, three, four, or five years. Your repayments stay identical for that entire period, regardless of what happens to variable rates in the market.

Once your fixed term ends, your loan typically converts to a variable rate unless you refinance to another fixed rate or negotiate a new term with your lender. That conversion happens automatically, and the variable rate you roll onto might be higher than the discounted rates offered to new customers.

Consider an early childhood centre director who fixed for three years during a period of rising rates. Their repayments stayed at $2,100 per month while colleagues on variable rates saw theirs climb to $2,450. When their fixed term ended, they refinanced to a new two-year fixed rate rather than accepting the revert rate, which kept their repayments manageable and avoided a sudden jump.

Shorter terms give you more options sooner

A one or two-year fixed term suits educators who expect their circumstances to change. If you are planning to move, increase your income, or want the option to make larger repayments soon, a shorter fixed period means you will not be locked in for as long.

Shorter fixed terms also tend to have lower break costs if you need to exit early. Break costs apply when you pay out a fixed rate loan before the term ends, and they can run into thousands of dollars on longer terms if rates have dropped since you locked in.

An educator working casual shifts across multiple centres locked in a two-year fixed rate when they secured ongoing employment. Two years later, they moved to a new role with higher pay and wanted to increase their repayments to reduce the loan faster. Because they had chosen a shorter term, they refinanced without significant break costs and switched to a variable rate with an offset account that suited their changed situation.

Longer terms offer extended rate protection

A four or five-year fixed term works when you want to lock in a rate you believe is favourable and avoid the risk of rate rises for as long as possible. This approach suits educators with stable income who value knowing exactly what their repayments will be for an extended period.

The downside is reduced flexibility. If rates fall significantly during your fixed term, you will still be paying the higher locked rate unless you are willing to pay break costs to refinance. Longer fixed terms also limit your ability to make extra repayments, with most lenders capping additional payments at around $10,000 to $20,000 per year during a fixed period.

In our experience, educators with young families often lean toward longer fixed terms because it makes household budgeting more predictable during years when childcare and other costs are high.

Split loans let you hedge both ways

A split loan divides your borrowing between fixed and variable portions. You might fix half your loan for three years and leave the other half variable. This gives you some rate protection while keeping access to features like offset accounts and unlimited extra repayments on the variable portion.

Split loans are common among educators who want stability but do not want to be fully locked in. The variable portion also gives you flexibility to refinance or adjust without triggering break costs on your entire loan amount.

If you are applying for pre-approval and are unsure which structure suits you, a split can be a practical middle ground that keeps your options open once you settle.

What to consider before locking in a term

Think about where you will be in two, three, or five years. If you might move cities, change roles, or want to renovate, a shorter fixed term or a split loan gives you more room to adjust. If your focus is purely on repayment certainty and you are settled in your role and location, a longer term can work well.

Do not assume the longest fixed term is always the most secure choice. Rates and your own circumstances both change, and flexibility has value even when certainty feels appealing.

Some lenders also offer different rates depending on the term length. A three-year fixed rate might be lower than a five-year rate, or vice versa, depending on what the lender expects rates to do. That does not mean you should chase the lowest rate without considering the term length that actually suits your situation.

Call one of our team or book an appointment at a time that works for you. We work with early childhood educators regularly and can walk you through which fixed term or loan structure fits where you are now and where you are heading.

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