Fixed loan - is my thinking correct?

Loan 1 - I have a fixed rate loan about to revert back to variable in 2 weeks. The loan is $340k.

Loan 2 - In May, I'll need another loan for building and it will be getting a bit tight for borrowing in the bank's eyes (even though I have $250k in an offset, the banks ignore it). I will be fine to borrow but want everything working in my favour.

My question is, do I fix loan1 for a new term
A) as interest only for lower repayments
B) as P+I to get a better rate

I'm thinking I need to do A so that my monthly liability is lower when I go to apply for Loan B.

Does that sound right? Thoughts?

 

Only you would know what you will do.

If you are asking if you should fix, then that is something you should get specific advice on. It will depend on rates, terms, cash amounts, non-deductible debt etc.

 

May help from a cash flow perspective, however, may not help with the borrowing capacity unless you were going to a non bank lender (which allows construction), which determines borrowing capacity based on your actual repayments

 

You probably need to sit down with a broker who can prepare a debt plan for you before you make this decision. If you can service the new loan with a mainstream lender, then P&I will likely increase your borrowing power, if you need to go with a second-tier lender, then IO would help. It's personal to your circumstances and you won't be able to get accurate feedback in this type of forum.