Almost $2,000 in fees to fix interest rate

Qudos bank want almost $2,000 in fees to fix our mortgage which has 3 splits ($649 per split). The mortgage was originally only 1 loan (taken out 2 years ago) and was split later however they are not negotiable on the fees.

Our current variable rate is 3.89% we would be fixing at 4.09% for PPOR portion and 4.39% for investment portion.

We would like to try refinance later in the year to another bank with an income increase however we don't think it will be enough to get us across the line with the tightening of servicing.

To fix or not to fix.

 

It's pretty clear to me that fixing is a not a great idea for you right now. Your current rate is fine, and if you want to refi later in the year you could be up for even more fees in break costs.

 

Are you basing this on this thread or other bits of info we've given in other posts?

We were thinking one or the other, fix or wait and refinance but I would be surprised if we get over the line on the refinance.

 

Just based on this one - I read it as though you'd be looking to refi later in the year, fixing will make that potentially problematic

Your current OO rate is good, so rather than pay a fortune to fix, I'd save those funds in your offset and refi down the track. Have you had someone model out your borrowing capacity once Chrissy is at work? That might be the first step.

 

Not yet because we've lost rents and won't have picked up much income until later. The extra income is the unknown, Chrissy may have work but more definitely I've picked up a casual job we just won't know how many hours until later in the year.

 

That does make it a bit more tricky to predict. Personally, with those fees to fix I'd be more inclined to leave as is - have you worked out your effective rates when adding those fees in? Undoubtedly a lot higher than what's quoted. You'd want your loan size to be significant to warrent it.

 

Didn't figure out effective rate (but I will now) just worked on how many additional interest we would pay with 1% and 2% rate increases.

Edit: Effective rate with the fee adds approx 0.09% to the rate. So 4.18% PPOR and 4.48% Investment over 3 years.

 

Another option is to leave the PPOR part variable. That way you can minimise the risk to the IP splits which is what's really being targeted at the moment, and leave the PPOR part at its nice low rate. And avoid some fees at the same time.

You're effectively locking in almost 2 rate rises on your PPOR, so need 3 to be in properly in the money. Not a great deal to me. With the INV loans, you're locking in pretty much in the money already, based on what other lenders are doing - mid 4%'s is a good Inv rate these days.

 

At the moment the entire loan is at 3.89%, we got in back when it was Qantas Credit Union and the rates for IP were the same as OO.

You're right, locking in isn't likely to do anything ground breaking. We really need to offload our Liberty loans to another lender, they are at 4.9% and 4.6% variable, waiting for the lock in rates from them, apparently because our credit rating is quite good they should offer a reasonable rate.