I have a PPOR that I have bought within the last 6 months and am considering buying my first IP later this year.
With the interest rate rises and a change in personal circumstances (getting married), I erred on the side of conservatism and locked in a large proportion of PPOR loan at a fixed rate largely for the certainty it gave me of what my repayments would be and being a little unsure of how married life would impact on my after tax income. In the ensuing months, I have found, that I am making my fortnightly repayments quite easily and my with my salary from my job, have figured even if there are 0.25 point rises – it impacts my repayments only slightly.
I am contemplating upping the percentage of my loan that is variable to quite a high proportion, largely to give me the flexibility to make additional repayments, pay the PPOR as quickly as possible and utilise a mortgage offset (have a few dollars in cash at the moment).
I would be grateful to hear peoples views on fixed v varibale….on your PPOR what is better right now……what proportions do people have of each (if at all split)……in what circumstances would you change proportions.
I have no fixed loans myself. I like the flexibility of being able to change banks easily if need be without potentially high exit fees.
Terryw
Discover Home Loans
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Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
All my loans and majority of my clients have variable on both PPOR and IP loans.
Our lender gives us an interest only product that allows us to make extra payments and lump sum without penalty, why would you want a principle and interest loan when you can still pay down your loan on this type of facility
Cheers
Paul
Make your money work for you, not you work for your money
Paul Meese
Onyx Finance
[email protected]
0412 850 820Hi Da man. The largest percentage of people ever seem to be ‘fixing ‘ all or some of their loans at the moment, but it all comes down to personal preferences, attitude to risk of the unknown Vs. security of knowing what you are paying each week/fortnight etc etc. In all fairness, if you compare the repayments on a 20-30 year loan, with a current ‘budget type’ variable rate, compared to the average fixed rate, there is not a lot of difference in the scheme of things. I guess the fact that fixed rates are currently well below the ‘standard’ variable rates in general indicates the way lenders feel about the next few years – ie if ‘they’ felt rates were going to go up again significantly they would likely jack the fixed rates up too – as happened a few weeks ago before the last RBA rate review, and as is happening now, they are gradually creeping back down. If you had a competitive bank or non bank basic variable loan, one 25 point interest rate decrease will drop the variable rate below the current fixed, but one upwards and……you get the idea. I’m all for loan splitting, as you obviously have done, and some non bank lenders will not charge a cent for this for the life of the loan. Win win (The ‘big 4’ don’t charge either – if you pay them an annual fee for the privelidge of them letting you pay them tons of interest each year……) . You can fix a portion, and leave some as variable, which of course you can ‘chip away at’.
Just one point though based on what you said, you will find yourself up for a lot of money in so called ‘break costs’ if you change your fixed loan before it’s term has finished. With your loan only 6 mths old, I imagine you have at least another 2 1/2 -3 years on the fixed interest loan term, so you may be better leaving your fixed interest part until the term is over or close to over, and instead put the money you save towards the deposit for your new (or next) investment property. All the best with your journey.[strum]HI Da Man if i read between the lines correctly you intend to increase the variable part of your PPOR? if this is correct and you intend to do this by paying off some of the fixed loan it will pay you to check out the cost of this.
Not sure if you are aware however with the fixed loan paying off large sums can incur some expensive fees.
Wayne
Mortgage Adviser
Email [email protected]
http://www.alphamortgagesolutions.com.au
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