Is it correct that a fixed interest rate gives more serviceability and a higher loan amount because of the lower than 2% loading of the interest rate that applies to a variable interest rate?
If so, would it be a good strategy to go fixed for one year to maximise the loan amount and then back to variable after that. Because fixed usually doesn’t come with an offset account, how do I know if there would be an offset account when it is reverted back to variable.
Thanks
Hi magic,
Unfortunately it doesn’t work that way. Lenders still add a standard buffer to fixed rates for serviceability purposes (as these products revert back to a variable rate at the end of the fixed rate term).
Westpac and St George used to allow a buffer of only 0.5% on fixed rate products of 3 years or more, however they have stopped that practice now from what I recall.
Cheers
Tom
Can still aid you slightly as lenders often sensitise their rate at a margin above the rate they charge.
This could be 2.25% above their Standard variable rate or their 1-3 year fixed.
In saying all of this if serviceability is a concern then there are many better ways to overcome this issue.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Technically it can help a little bit – but not too big a deal that it should encourage someone to fix their loans. As Richard said – there are other avenues to explore.
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]
If so, would it be a good strategy to go fixed for one year to maximise the loan amount and then back to variable after that. Because fixed usually doesn’t come with an offset account, how do I know if there would be an offset account when it is reverted back to variable.
You can achieve the same result with variable, however as mentioned better ways to skin that cat.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
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