Should I go fixed or all variable?

Discussion in 'Loans & Mortgage Brokers' started by Zammy, 5th Mar, 2021.

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  1. Zammy

    Zammy Well-Known Member

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    I'm about to enter into a loan agreement for my first home which is a 2 loan (land and construction). My broker has suggested me to go all fixed for 4 years. Is this good advice? LVR 80%
     
    Last edited: 5th Mar, 2021
    Zammy, 5th Mar, 2021
    #1
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Fixed rates are very cheap right now, I think it's unlikely that variable rates will drop below the current fixed rates.

    However there are restrictions on fixed rates that might not suit your circumstances.

    Can't really give you a good answer because we've no context on your circumstances to answer the question. You should ask the broker for the reasons they're making the recommendations and why it's relevant to your situation.
     
    Peter_Tersteeg, 5th Mar, 2021
    #2
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  3. Shazz@

    Shazz@ Well-Known Member

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    4 years is a long time...
     
    Shazz@, 6th Mar, 2021
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    That will make it impossible to use an active debt recycle strategy to pay the property off more quickly.

    What are YOUR goals and objectives with the debt that the broker has made that recommendation towards ?

    ta
    rolf
     
    Rolf Latham, 6th Mar, 2021
    #4
  5. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    Well depends on your cashflow, how much you can pay down on your fixed loan per year and does the product allow you to redraw from a fixed rate product if you go all fixed.


    You'd want to leave a portion of it variable.
     
    Tony Xia, 6th Mar, 2021
    #5
  6. skyfall

    skyfall Well-Known Member

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    I would probably fix for 1-2 years if the spread between fixed and variable is more than 0.6-0.8%
     
    skyfall, 6th Mar, 2021
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  7. wylie

    wylie Moderator Staff Member

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    Maybe consider fixing part of the loan.

    We have seven loans, all fixed for two years. We can deposit up to $30k into each loan without triggering a break situation.

    We aren't going to have that much lazy cash within two years so it is a safe option for us to fix. And we made sure the one house we may sell was released from the security held by the bank, so we can still go ahead and sell if we want to without engaging with the bank to release the security.

    I don't know that I'd want to fix for four years. A lot can happen in four years.
     
    wylie, 6th Mar, 2021
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  8. Property Baron

    Property Baron Well-Known Member

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    Especially if as some have suggested interest may rise
     
    Property Baron, 6th Mar, 2021
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  9. 007forever

    007forever Member

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    My lender is suggesting 5 yr and I will take it. it will be very good for the cashflow for sure
     
    007forever, 6th Mar, 2021
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  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    5 years fixed on what logical basis for your personal circumstances ?

    ta
    rolf
     
    Rolf Latham, 6th Mar, 2021
    #10
  11. 007forever

    007forever Member

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    Both logical and personal. I can free up cash to invest in other stuff that will generate more than 3%, and I also believe the interest rates have bottomed.
     
    007forever, 6th Mar, 2021
    #11
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    cools

    What will you invest in ?

    3 % for owner occ debt seems steep though ?

    ta
    rolf
     
    Rolf Latham, 6th Mar, 2021
    #12
  13. Trainee

    Trainee Well-Known Member

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    if ppor the interest is not deductible, while the investment return you get might be taxable.
     
    Trainee, 7th Mar, 2021
    #13