All Topics / Finance / Opinions on fixed loans

Viewing 10 posts - 1 through 10 (of 10 total)
  • Walking to run
    Participant
    @alisdair-horgen
    Join Date: 2014
    Post Count: 68

    Hello everyone,

    thought I’d put this one out there. For an investment loan, would you fix 100% of your loan? Why? Why not? Would you split and fix half? What’s your strategy?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    This question has been asked a dozen or so times on this forum over the last 3-4 months.

    Rather than respond again suggest you do a search on the subject and you will read past comments.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hiya

    It depends.

    If it’s a set and forget IP that you don’t plan on doing too much with (selling, releasing equity, etc) and you take comfort in knowing what your repayments will be then fixing can be a good option.

    Note – you can still release equity against a property with a fixed loan but if for some reason the lender doesn’t allow it then you’ll have to refi to another which can be costly due to high break fees.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Walking to run
    Participant
    @alisdair-horgen
    Join Date: 2014
    Post Count: 68

    Fair enough Richard,
    wish there was a neater archive that compiled things.

    Profile photo of Redom SyedRedom Syed
    Participant
    @redom
    Join Date: 2014
    Post Count: 18

    Think of it as a risk mitigation tool.

    One of the biggest risks to cash flow for investors is interest rate risk. Fixing rates over different periods can manage this risk.

    In terms of pricing, fixed rate market is very competitive at the moment. Years of cheap money around the world are flowing through to lower funding costs. Often people confuse the ‘fixed rate’ price as some sort of educated guess by the banks as to where rates will be in a few years time – its not.

    It reflects the funding costs in longer term funding, which are largely driven by international credit markets. The worlds massive players have all gone through very large monetary easing that has pushed down credit prices (US QE, Europe and Japan monetary easing). How long that continues is debateable and very difficult to predict (1 year, 2 years, 5 years).

    Cheers,
    Redom

    Redom Syed | Confidence Finance
    http://www.confidencefinance.com.au/
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    Home Loan Specialists based in Sydney, serving clients Oz wide.

    CharlieX
    Participant
    @charliex
    Join Date: 2015
    Post Count: 98

    it depends on whether you can take the risk?
    fixed rate good when you are at a lower rate than the current rate if it is higher, and bad if the current rate is lower than your fixed rate.

    most people I know have variable rates on their investment properties, and we do too. it’s a risky business, trying to predict rate, but all come down to whether you can afford. it’s your risk range.

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    I wouldn’t say it’s necessarily GOOD or BAD. It comes down to the risk profile.

    If a fixed rate was 0.01% more expensive than the variable offering, but gave a single income family with a tight budget piece of mind, is that not a GOOD result?

    Horses for courses – don’t try gamble to beat rates by choosing fixed rates, choose them when you want a reliable repayment amount for the forward period.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
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    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Mark Mendel (iBuyNew)Mark Mendel (iBuyNew)
    Participant
    @markmendel-ibuynew
    Join Date: 2015
    Post Count: 6

    I would agree with Corey. It all depends on your situation and how much risk you are prepared to take. If you prefer to know exactly what you will be repaying each month then you might prefer a fixed rate loan.

    At the moment, interest rates are very low so it makes a great time to fix your loan. Also, if you have many IPs then having a fixed loan allows you to know exactly how much you are repaying on each property.

    Mark Mendel (iBuyNew) | iBuyNew
    https://www.ibuynew.com.au
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    Your partner in off the plan property

    Profile photo of MattMatt
    Participant
    @mattgolding
    Join Date: 2015
    Post Count: 1

    I’m currently deciding on whether to fix or not. My school of thought is it would be wise to fix (in my case) as rates are at a historical low (reserve bank just knocked another 0.25 off). Some people say further cuts are in the pipeline but chances are they will creep back up to historical average in a few years to come. I might fix in for 5 years, that way I have a bit more control with finances/cash flow and can be more confident when increasing my IP portfolio.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Five years is a very long time to lock yourself in with a lender. What happens if you need to refinance or sell up? The break costs could be quite high.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

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