PPOR Loan Split Decision

Hi All,

I have a PPOR loan of 350k remaining which is currently variable but as the lenders are jacking up rates, would like to know whether splitting this 350k to one fixed and one variable is a good way of doing it. I am saving quite a lot of interest through my existing offset account against the PPOR LOAN. We have around 200k in there. So if I go with fixed , obviously there's no offset account facility available or is there ?

Hence need some suggestions if possible. I have been looking at getting an IP as well but not sure when that will be.

Rog

 

You cannot, generally, have an offset on the fixed portion so if you want to fix keep a variable portion big enough for the cash and anticipate increased savings as you go along.

Eg. if you keep $200,000 variable and have an offset of $200,000 now next few months you may have $210k cash.

 

Thank you Terry. That is why I am thinking whether to reduce my PPOR debt by another 50k and put 300k split to 260k variable and 40k fixed.

 

Splitting up the loan is fine.

However - make sure the variable split is large enough so you don't find yourself in a situation where you have an offset account balance that's higher than your variable loan.

Take into account the pros/cons of fixing too. Break costs can be high - and there's obviously a lack of flexibility....but you also get a level of certainty which is nice in the current lending climate.

Cheers

Jamie

 

Is it even worth the bother of fixing just $40k?
Even if it was a 1% saving that would only be $400 per year.

 

That's $400 I can spend on shoes!! Why would you not want to save $400?

Or even $100? It's not a hard process to fix a loan.

 

It is unlikely to be 1% difference though. You have to factor in the inconvenience and the giving up of flexibility. Still worth considering though.