Is it a good time to fixed our mortgage

Hi everyone,

We’ve just sold our home and currently in the market to buying another PPOR. We haven’t gone to the banks/mortgage broker yet about loans, but I was wondering whether we should get a loan and fix it for a few years or whether it’s best just to go variable? What’s the best strategy for us?

Also, ideally we would like to look into buying an IP maybe 5-10 years from now. I know it’s a long time away, but I want to try and structure our loans correct from the onset. Is it best to have an offset account attached to the loan and make all extra repayment into there instead of directly into the loan? Is it possible to have two offset accounts attached to one loan? Ideally I would like an offset where all our salaries go into and another offset for our extra repayments. Having them separated helps me from overspending money on useless things lol.

Any advice would be greatly appreciated, thanks

 

Thanks Rolf, yes I understand that I didn’t provide much information to really get any meaningful advice.

Our plan is to make additional payments every fortnight for a few years to pay down some of mortgage. Hopefully with the combination of extra repayments and capital grow, we’ll build a little bit of equity in the property to be able to use it to finance an IP.

If we plan on paying down our mortgage, does that mean we can’t used fixed rates? From reading this forum last night, it seems that fixed rate loans don’t allow you to make extra repayments. But if we put those extra repayments into an offset instead of the loan itself, would this be a way around that limitation?

 

A simple and common structure if you want to lock in the lower fixed rate AND take advantage of the full flexibility around early repayment / reducing interest cost via offset is to do a split product.

In order to optimise the splits it is good to think about how much surplus you'll have during the fixed period and then set that as the variable split.

E.g. if it is a $1m loan with fixed period of 2 years (24 months)
- Monthly surplus income of $4,000pm
- $4,000 x 24 = $96,000 for variable
- Therefore $904K in fixed

You'd need to think about your own projections e.g. any additional bonus payments, potential windfalls, and conversely any purchases that need to be accrued for like weddings, cars, etc but at a principal level having a rationale to the numbers will have you best place to deliver the best outcome.

edit; pretty much what Rolf said

 

Thank you both for the information! Although Morgs said the same thing as Rolf, it is easier for me to understand when you show me breakdown of numbers like this. Very much appreciated guys. I will speak to my broker about trying to set up the split.