All Topics / Help Needed! / RIGHT TIME TO BUY?

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• roy22
Member
@roy22
Join Date: 2009
Post Count: 37

Got a couple of little dilemmas to share and thanks for the advice in advance.

I am seriosuly thinkning about restructuring my home loan which is fixed at 8.40% for the next two years. i have been told by the bank i have to pay \$13000 to break contract and i am considering doing it after hearing interest rates are going to fall even lower. Would anyone know if there is a big hidden mistake or does it sound like a reasonable thing to do?

Secondly i worked out that if i do switch to a variable, and pay interst only i will be very close to having a cash flow+ investment.

So my other question is if i can do this for one house, is it the right time to go and buy 2 or 3 houses, which could almost level out with repayments and rent income, while the interest rates are low??

Any advice is always welcome as i am only learning this game.

mattnz
Participant
@mattnz
Join Date: 2007
Post Count: 574

Judging by today's lack of movement from NAB and CBA, don't count on interest rates going much lower.

1Winner
Participant
@1winner
Join Date: 2004
Post Count: 477

Yours question needs only a bit of mathematics

Work out how long will it take you to recuperate the \$13,000 if you drop from 8.4 to 5%
Consider for how long will the v interest rate stay at 5 or lower.
Work out how long will it take for the v.interst rate to reach 8.4 again
When you have negotiated your way out of your contract, consider writing a colorful letter to the CEO of the bank in question and send a carbon copy to our "honorable" treasurer

Keep an eye on the fixed interest rate on offer.
If fixed interest rate on offer are lower or equal to the variable interest rate, that means the variable will drop further and the bank is trying to catch you in a soon-to-be-too-high rate.
If the variable interest rate on offer starts to be higher than the variable , that means the rate will slowly start going up.
The speed of the increase can be guessed by the differential between the existing variable rate and the fixed rate on offer.

god_of_money
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@god_of_money
Join Date: 2008
Post Count: 970

And also how much did you borrow? It is different between 1 million and 100k

1Winner
Participant
@1winner
Join Date: 2004
Post Count: 477

As for buying, there was never a better time…providing you can afford the repayments at 5% and at 10%. If not you are taking a considerable risk. Labor governments are notorious for manipulating markets and legislate  with the grace of a drunken elefant in a china shop, so expect everything, including re-election by the massess holding \$900 regardless of braking every single promise made to be elected.

Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024

Just to correct a former post CBA did drop 0.10% this afternoon.

In saying this NAB where always more competitive than the other 3 majors so is just a matter of squaring the ledger.

Richard Taylor | Australia's leading private lender

roy22
Member
@roy22
Join Date: 2009
Post Count: 37

thanks for your help everyone. i think i will go ahead and restructure the loan. the variable rate i am being offered is 4.94% which is close to half of what i was paying. even if it the breaking cost does equal the same amount of interest i would have paid in two years, i dont want to regret not having the opportunity of the low interest rates for the next 5 years, if i do decide to fix in the near future.

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