Time to fix

Discussion in 'Loans & Mortgage Brokers' started by Perthguy, 23rd Nov, 2016.

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  1. Perthguy

    Perthguy Well-Known Member

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    I have had fixed rate loans before, so I know how inflexible they are an all the things you can't do with them. I have not triple checked but I am fairly certain that none apply in my case. Further to that, I would certainly go through the potential issues with my broker before taking such a big step. Anyway, I found out the other day I can fix all my loans at 3.97% p.a. for 5 years (current rate is 3.94% p.a.).

    Given the uncertainty of what is going to happen with interest rates, it seems tempting to fix now and have certainty for 5 years.

    I am trying to think of downsides. I haven't thought of any yet. The only potential issue would be a possible security substitution on a fixed rate loan. That's possible isn't it?
     
  2. spludgey

    spludgey Well-Known Member

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    If you're pretty sure you won't need to sell in the next five years, then I'd definitley fix at those rates! I fixed at 4.15% for three years and I'm still happy with that decission and obviously this is a much better deal.
     
  3. Perthguy

    Perthguy Well-Known Member

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    Definitely not selling!
     
  4. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    How about a 60:40 Fixed:variable scenario? Then you can have offset against the variable and still enjoy the nice low rate for the fixed.
     
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  5. Perthguy

    Perthguy Well-Known Member

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    That's a good suggestion. I will go through the numbers with the MB and see what might work.
     
  6. Brady

    Brady Well-Known Member

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    Was another thread where I saw 5YR Fixed Westpac 3.85% see if that can be matched - note might not be comparable PPOR v IP
     
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  7. Perthguy

    Perthguy Well-Known Member

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    Good point. Mine will do 3.84% p.a. for OO. One of the loans is secured by a main residence too so may be able to be switched to OO.
     
  8. Barny

    Barny Well-Known Member

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    Work out what you can save per year into the offset. Say it's 20k per year, leave around 100k variable, if 5 years, least that way you make the most of the offset. 5 years is a super long time to fix, many things can happen. I do like what Westminster suggested. 60/40.
     
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  9. CK_Invest

    CK_Invest Well-Known Member

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    I've never fixed before - are fixed rates generally P+I only? Or I/O is available?

    I understand most fixed rate mortgages don't have the offset feature correct?
     
  10. Perthguy

    Perthguy Well-Known Member

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    As far as I know it is only for I/O but you would need to check this.

    I was going to say that is right but ING do offset with an OO fixed rate loan.

    Where an owner occupier Fixed Rate Loan is combined with an Orange Advantage (100% interest Offset) home loan, a fixed interest rate discount of 0.10% p.a. will apply to our advertised fixed interest rates.

    That would make it 3.74% fixed for 5 years. That really might be worth pursuing.
     
  11. Sonamic

    Sonamic Well-Known Member

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    If the LVR is high it's worth it. Not much point if the LVR is say 60% and you want to release some equity in the next year or 2 to go again. Not sure how this goes with a 60/40 split though. Anyone?
     
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  12. tobe

    tobe Well-Known Member

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    Instead of fixing the lot, consider rolling fixed. So fix some now for 3 years, some more next year for 3 years etc. or fix all now but with different terms.

    Dollar cost averages the buy in, but importantly leaves you with some flexibility as you go and means you get to start gently on the way out. If variable rates are higher on the way out it's easier getting used to the new repayments a little at a time rather than all at once.
     
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  13. Perthguy

    Perthguy Well-Known Member

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    The properties being fixed won't have equity releases but that is a good point about structuring.
     
  14. Perthguy

    Perthguy Well-Known Member

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    I think that will work.
     
  15. Perthguy

    Perthguy Well-Known Member

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    Fixed rate Principal & Interest and Fixed rate Interest Only are available.

    Fixed Rate Home Loan - P&N Bank
     
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  16. Barny

    Barny Well-Known Member

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    At the end of your fixed rate period, will it automatically convert back to interest only? the rules could change and be stuck on P&I
     
  17. tobe

    tobe Well-Known Member

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    Most lenders revert back to p&i at the end of the fixed rate term. Most lenders have to match the fixed rate term and the I/o term.

    Which makes it really expensive coming off fixed even if the rates are similar if you haven't got the serviceability to refinance.
     
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  18. Barny

    Barny Well-Known Member

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    Yep this will be an issue for some that maxed out prior to the serviceability changes. This also means me.
    Perthguy might be something to consider if you fall into this category.
     
  19. tobe

    tobe Well-Known Member

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    And who knows what the credit environment will be like in 3 years?
     
  20. Perthguy

    Perthguy Well-Known Member

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    I'm good now. If I was coming off a fixed rate to P&I with these loans it would be fine.

    But it is good to know in advance so I don't over-leverage between now and then. If I know it's happening I can plan for it.
     
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