‘Interest rate rises’, ‘Mortgage Stress’ all of these terms are being splashed around the news lately, and everyone wants to know how they will be affected.
Sweeping changes in the industry have meant that Tim hasn’t had a day off in almost a month. Learning as much as we can about the changes that have been made and how we can help our clients has kept us very busy!
One question we are asked all the time, is: Should I fix my loan?
All the information we are receiving is indicating that interest rates will rise, but fixing in a low rate now could be costly if you are considering the following:
1. Selling your home.
Fixed loans come with a very hefty exit fee which can cost thousands of dollars if you sell the home that the loan has been fixed against during the fixed term.
2. If you believe you might need to refinance during the fixed term.
You can’t make a variation to the loan once it has been fixed (without incurring substantial fees) – this includes drawing on your equity, refinancing to another lender changing the structure of your loan.
3. If you have a large amount of money sitting in an offset account.
A fixed loan means that your loan amount AND your loan interest rate will remain constant for a period of time- your offset won’t be working to reduce the amount that you owe on your fixed loan.
4. If you have a lot of expendable income that you are using to pay down your loan quicker
A fixed loan doesn’t have the flexibility to pay down the loan quickly where your capacity allows like a variable loan will- because of the impact of compound interest, this could cost you thousands over the life of the loan.
HOWEVER, there are ways that you can protect a portion of your interest rate with a fixed rate, and leave some of it variable to make the most of your circumstances where it allows. Now is not the time to ‘do nothing’
Book your free loan structure consultation today by calling 0434 494 656. Or contact us for some more information.
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Disclaimer: The above information should not be deemed to be advice as it does not take into account the specific details of your situation. Please book an appointment to discuss your options in greater detail with consideration of details that are unique to you.
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