Changing to Fixed Rate Loan - any catches?

Discussion in 'Loans & Mortgage Brokers' started by Alex P Keaton, 1st Apr, 2020.

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  1. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Hi

    I’m looking for ways to save some money. I’ve lost my second income (due to corona virus) so things have become a bit more tight financially for me now but I’ve been keeping positive and have been on a strict budget (watching I don’t spend too much now on coffees take aways, snacks etc) and I’m so grateful I have my full time permanent job as some have lost jobs.

    Situation is that both my ppor and my IP reverted from IO to P & I payments last year.

    My current IR for my CBA IP is 4.28 %. Loan is $342,000. Property value $275 k - $320 k

    I’m currently on the phone waiting to speak to someone at CBA. The wait time is quite long these days but never mind.

    My PPOR has no equity either unfortunately. Loan $203,000. Valued at $180 k - $200 k


    If I were to get a one year fixed rate loan at 2.84 % my repayments will go down by $211 per month. This would be a big help!

    I don’t have any money in the offset attached to the CBA loan. It’s in my offset against my ANZ ppor loan.


    But what are the catches! What if I needed to sell for instance. Would there be a break cost involved?

    Are there any other cons or things I haven’t thought of.

    I appreciate any help. I know you must get heaps of these questions.

    Also I’m glad I sold my other IP a few years ago or I would have been well and truly in trouble.

    And yes I know I screwed up you don’t need to tell me that. A mistake made back in 2014 with a poor investment choice and bad timing that I’m living through now. But I’m working through it now hanging on and hopefully I’ll see better times ahead. Right now I just need to get through the next couple of years. I’m positive I can get through this time.

    The other thing is I’m going to see if CBA will let me go IO payments for a while. Not sure if they’ll say yes as they knocked me back around six months ago when payments switched to p & I but ya never know in this crisis period they might be more lenient. It’s worth me asking.

    TIA
     
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  2. Trainee

    Trainee Well-Known Member

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    Main things are fixed means no offset, and if you pay out the loan (such as from selling) during the fixed period means there will be a break cost.
     
  3. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Ok thanks. No offset is fine

    I definitely don’t want to sell in the next 12 months as I’d lose money on it. I’m better off holding if I can and I think I can achieve this fine as I’m budgeting better now and the decrease in $200 will help too

    I think this is the way to go. Lol I’ve been on hold with CBA for 58 minutes now. It takes around an hour these days to get through
     
  4. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Lol. I’ve been waiting on the phone now 1 hour 34 minutes.
     
  5. wylie

    wylie Moderator Staff Member

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    You might find your fixed interest loan can have a certain amount deposited. When we had a couple of fixed Westpac loans, we were able to deposit up to 30k but anything over that triggered a break (I think this is how they explained it to me).

    So I kept 29k sitting in the loans, available for redraw. If you are saving $200 a week it would be good to put that to good use, and save interest if you can.
     
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    All the usual catches to fixed rates apply. But if you are still on hold ask them if having a fixed loan will prevent you from asking for a repayment holiday in the middle of the fixed period.
     
  7. Scyth

    Scyth Active Member

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    I was on hold for 3 hours 24 minutes with CBA last Friday! They need to hire some people too.
     
  8. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Oh no. I just hung up. Wish I’d seen this first. I would have asked.

    It took 2 hours to get through. Lol. Oh well. But I don’t think I’ll need a repayment holiday anyhow. The lady said I’ll save $265 per month on 2.84% which will be a great help.

    She said she could fix it for me then and there but I said I better talk to some people first and do some research as I’m not sure of all the pros and cons and I didn’t want to make a mistake.

    There was the option of paying .15 less with the package. You have to pay $395 per year with the package and I don’t see the point of having a package. Seems like a waste of money.
     
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  9. BKRinvesting

    BKRinvesting Well-Known Member

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    I second this,
    I've been wondering the same thing.
     
  10. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Hi thanks for the info. I don’t have much cash to add though.

    Nah it’s $265 per month saving.
     
  11. Brady

    Brady Well-Known Member

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    What was it that you were trying to achieve?

    Who setup your loan, broker or banker?
     
  12. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Lol omg
     
  13. Brady

    Brady Well-Known Member

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    No problem with CBA
     
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  14. Alex P Keaton

    Alex P Keaton Well-Known Member

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    I’ll email my broker next.

    My broker

    What I’m trying to achieve. Keep my head above water.
     
  15. Alex P Keaton

    Alex P Keaton Well-Known Member

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    What is no problem with CBA? Can you please clarify. Thanks
     
  16. Brady

    Brady Well-Known Member

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  17. thatbum

    thatbum Well-Known Member

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    Wouldn't be safer just to take up a repayment holiday as required and not go to fixed? That's what I would do instead of locking in fixed just for a relatively small benefit in cashflow.
     
  18. Alex P Keaton

    Alex P Keaton Well-Known Member

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    Oh ok. I hadn’t thought of it in that way. I knew a repayment holiday was an option but didn’t realise it would be a safer one going fixed. Thanks. I wish I’d asked before when I was on the phone. I’ll make another call. Ta
     
  19. Brady

    Brady Well-Known Member

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    Are you trying to ask for a deferral?
    Can be lodged online.
     
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  20. wylie

    wylie Moderator Staff Member

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    What saving could you get by asking for a lower rate, and not fixing?

    If you have lost your second job I can see why you would be tempted to lock in at a $265 per month saving.