Fixed rates to rise

I can't give you an actual percentage, because Commbank use this weird methodology to work it out. They have a guideline on their website, called the Early Repayment Fee fact sheet. The example they use is trying to get out of a $289k mortgage and the exit fee they use as an example is $23k !!!!

Imagine paying that!

 

It can be ginormous, for sure, if the rates have continued to go down after fixing. Definitely pays to be aware of that. Also why I don't usually recommend fixing for 5 years, as so much can change in that time.

 

We fixed two of our mortgages last year for five years at 4.59%. As you said, sometimes going early can bite hard.

We fixed another only a few weeks ago at 4.10 for five years, I don't think we will regret that one though.

 

Can someone please list the benefits of a Split Fix. Eg 60/40. Buy and hold property. Cashout/top up available on 100% of equity or only the 40% at Variable, if at all?

 

Cash out available at 80% less the current loan, regardless of if it's fixed or not. You just do a new loan split for the release.

 

Thanks Jess.

Just fixed one 100% at 3.89 for 3 years. Area is booming though so LVR is dropping daily.

 

Perfect As long as servicing is there, you're all good!

 

So you're saying that when it's a 60fix/40variable you can still do normal equity pulls and take out the 80% of the equity? (just like a normal one)

Cheers, Elives

 

It depends on the amount of the loan, the fixed rate, the variable rate now and how long the fixed period has to run.

Guide to exiting a fixed rate home loan contract | finder.com.au

- Some banks don't allow you to offset a fixed loan or only permit a partial offset of the fixed loan.
- If you want to pay down debt, there are strict limits on how much of a fixed loan you can pay down without penalty.

That's not a nice situation to be stuck in. I did the same.. fixed with no intention of selling but I was a bit of a different case. I refinanced my loan from 9.5% variable to 6.39% fixed. I also sold with just a couple of months to go, so my penalty was very small. The Early Repayment Interest was only $2,176.06. Totally worth it in my case and also, I had saved far more than that by being on the lower rate.

 

With CBA?

 

NAB IOI.

 

Yep as long as servicing is okay

 

i'd just like to point out that fixed interest rates is a product offered by the banks.

being a product, it means that the bank is making a profit from selling this product to you. what this all means is that behind the scenes there are some very very smart economists that are subject matter experts (much more knowledgeable than most investors - sorry guys) and they get paid serious money to work out the fixed rate (which is a projection of where they believe the rates will go over the timeframe.

so in summary, by fixing your rates - you are basically banking on these subject matter experts (the top percentile in their field) being wrong and the banks being wrong. how often have you known a bank to do something that they are likely to lose money on?

i personally may be sceptical, but given that understanding - i will watch the fixed rates as it provides a good indicator where rates are actually going to be over a period of time. but will pass on ever taking up this product, as by the time it is being offered to you - it has already gone through a risk assessment and ensured that the banks are right.

 

That's actually a common misconception - the banks offering fixed rates aren't gaming the system, they're just offering a different product which has a different funding line (primarily overseas funding). What this can mean is that it's possible to have cheap overseas funding leading to cheap fixed rates, whilst expensive domestic funding leading to higher variable rates. Lenders just on-charge their margin onto the fixed funding they receive, what happens in rates after is not important to them for these products as they're skimming the same margin each way.

 

Corey - thanks a bunch for correcting me, well there you go i learned something today and it's only 10AM appreciate the reply and it now makes sense how trump being president elect can make an impact on our fixed rates.

 

Really ? I was asking this a few times and none of them said yes to this.

So the only downfall is paying out the loan, if you transfer to new title or increase, then there is still a lot of flexibility.

 

Who were you asking? Many bank staff don't have very good 'think outside the box' skills which may be the issue.

There still is flexibility, it's mainly problematic if you need to sell, or refinance to acheive a certain outcome. Can cause issues if servicing changes mid fixed term though, for eg.

 

Yeah, bank staff.

I was thinking about fixing 2 that I will not refinance anyway, you never know if/when you may want to sell.

I still waiting for a call back from one, that was supposed to be Monday.....lol....

 

No sure if this helps anyone. I have around 800k locked in with cba for 2 years at 3.99%, 1 year 5months remaining. Enquired to get out of fixed and total cost is about 3500. So not that bad.

 

@Barny It'll probably be less than that very shortly.