Morning All,
I've had a search through the forum and have been unable to find an answer to this question, but sorry if I'm going over old ground.
Can somebody explain with regards to interest only, why the rate varies i.e
1 Year 4.99%
2 Year 5.09%
3 Year 5.34%
Am I correct in saying IO is only a variable rate?
Is it a higher rate for 3 years because you don't have to renegotiate an IO loan for 3 years?
With a 100% offset, which can vary the month to month interest payments owing, how does the bank advise this amount? Or is it a direct debit from the offset?
What is generally the best strategy when determining how long to set an IO loan in terms of years?
Thanks in advance.
I think you are a bit confused.
The rates you have quoted would be for fixed rates. ie if you fix the rate for 2 years it will be 5.09% for the 2 years. You can't have an offset or pay down the loan during that time. It has nothing to do with IO.
They are different because banks assume the rate will go up within 3 years.
Normally when you take out an IO loan it's for 5 years. After that you can normally negotiate for another 5 years (depends on the bank and your situation). You don't set the time. If you want to change it at anytime within the 5 years you can.
If it's variable then the rate will change as rates go up and down. Each month the interest is calculated on your balance and it just comes out of wherever you are paying it from (might be that account, might be another- up to you. It will vary slightly as some months have 30 days, some 31.
Excellent thanks Catalyst.
Catalyst is spot on – you're looking at fixed rates.
Variable rates don't vary depending on years – they fluctuate in line with RBA rate movements (well generally speaking anyway – some lenders will change them outside of RBA decisions too).
cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi BomberRoui.
As a matter of interest, who quoted you those rates and when ?
Cheers
thecrest
thecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
Hi Crest
I'm not sure if it helps or not but those rates aren't particularly special when it comes to 1, 2 and 3 year fixed rates.
There are others doing sharper rates across the board. One of them is even providing a $1250 cashback to refinance to them.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Morning Crest,
They are rates for NAB. I think for their variable rate (interest only) is 5.03% possibly?
Cheers,
BomberRoui
Their broker division, Homeside, has better fixed rates across all years and lower ongoing fees.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
And their other arm being Advantedge has no ongoing fees or charges at all.
Certainly you can do better than the NAB for a standard fixed rate loan.
A couple of lenders even do fixed rates and 100% offset accounts so best of both worlds.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I quite like Advantedge (well most of the time – I have had my share of hassles with them but that applies to all banks). If they just offered an offset they'd see more business….but from reports, they're getting plenty of business anyway.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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