Another Variable Vs Fixed what would you do question

Discussion in 'Loans & Mortgage Brokers' started by Otie, 14th Oct, 2018.

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What term would you fix IPs for if you have 5 years IO remaining?

  1. 3 Year at 4.09

    13 vote(s)
    81.3%

  2. 4 Year at 4.39

    0 vote(s)
    0.0%

  3. 5 Year at 4.49

    3 vote(s)
    18.8%
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  1. mikey7

    mikey7 Well-Known Member

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    Some more maths for you based on the new numbers:

    You'd be $35,136 better off after that 3 year period, compared to locking in for 5 years.
    (Assuming you have $1.464m debt)

    If the banks rate was then 2.0% higher at that 3 year point (6.19%), you'd break even with the 5 year lock, after a further 2 years.

    So, with the new info.. do you think the rates will raise by 2% or more at or before the 3 year mark?
     
    mikey7, 16th Oct, 2018
    #21
    Otie likes this.
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    And further confusion :)

    many of my clients wont fix that much to all mature at the same time.

    They would look at the rate maturity risk an stagger some for 2 and 3 to 5

    ta

    rolf
     
    Rolf Latham, 16th Oct, 2018
    #22
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  3. Otie

    Otie Well-Known Member

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    When banks were putting them up it was consecutive.20-.25 rises month on month, so it would not take much for them to surpass but then again going by the economy outlook they shouldn’t be increasing at all, but the banks will need to keep profits up somehow after losing so much new business surely.

    The new numbers make the 3 year lock look most attractive to me now. I think I’ll roll the dice and take the 3 year. Atleast it’s deductible and the 17k would be better spent in my PPOR mortgage.
     
    Otie, 16th Oct, 2018
    #23
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Combine that with an active debt recycle strategy and watch the fat melt away :)

    ta
    rolf
     
    Rolf Latham, 16th Oct, 2018
    #24
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  5. Otie

    Otie Well-Known Member

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    I need to spend time reading over the debt recycling strategy again so that I do everything the right way
     
    Otie, 16th Oct, 2018
    #25
  6. Clayton

    Clayton Well-Known Member

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    Looking to hold a property for a 3 period then possibly sell for future build, knowing that I'd be paying more to switch to P&I Id assume id be ahead reducing some principle in this time. Crystal ball question if others are fixing recently or holding knowing that house prices are coming back & lending sector is slowing? anyone believe bank may entice existing customers with lower P&I anytime soon? cheers in advance
     
    Clayton, 18th Oct, 2018
    #26
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    doubt it
    basic cost of the product is increasing so cant see much further reduction unless RBA steps up ( to step down) and even that I see as not really being able to lower the slow upward creep

    ta
    rolf
     
    Rolf Latham, 18th Oct, 2018
    #27
  8. Clayton

    Clayton Well-Known Member

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    Appreciate your reply Rolf, confirms my thoughts to lock in. Next step is finding an online calculater to see how much I'll save over the 3yrs on a 300k loan paying the extra switching to P&I. Don't have a non deductible home loan so believe it makes sense to do it.
     
    Clayton, 19th Oct, 2018
    #28
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Like with many things, an active debt recycling g strategy needs a few moving parts to be really effective.

    Most people understand the strategies well.

    Few acr an implement for the same inertia reasons that afflict most of us
    Ta
     
    Rolf Latham, 19th Oct, 2018
    #29
  10. Clayton

    Clayton Well-Known Member

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    Just updating looks like i'd roughly be better off about $3000 over the 3 years switching to P&I. Not huge but I guess 1000 a year is money that can go towards a nice holiday Maybe an 80/20 split and reduce it further with funds offsetting the 20%
     
    Clayton, 19th Oct, 2018
    #30
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