Browse Forums Home Finance 1 Jan 16, 2013 11:40 am Curious as to how people have gone in this area - people who don't have a loan can have an input ! With loans at a low for the moment is a 5year fixed a good idea ? Will they drop further - will the banks go with that ? We've been with the same mob for a while so get a few extras (ie discounts etc). Also - the mixed - fixed and variable. Re: Views: Fixed Loan Vs Variable ? 2Jan 16, 2013 11:55 am We fixed for 3 years. It was in part due to the fact we wanted some certainty on what the repayment will be. I think that rates will have to come down a few more times before our fixed rate is more then the variable. On a previous unit I bought we fixed half and had variable for the other half. That way we had some certainty but also the opportunity to make extra payments as needed. Re: Views: Fixed Loan Vs Variable ? 3Jan 17, 2013 1:07 pm We will be going for a 3 year fixed loan as well, fixed is actually lower than variable with the bank we're going with, and with rates being so low at the moment, I definitely think fixing is a good idea. I honestly don't think the rates are going to get any lower, but even if they do, you're still better off fixing now for the long run as they will definitely be up again in 2-5 years. Settlement: 10.02.13 Slab: 06.03.13 Frame: 08.03.13 Lock-up: 05.04.13 Handover: 03.06.13 Build thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=59555 Brisbane Photography Re: Views: Fixed Loan Vs Variable ? 4Jan 17, 2013 2:31 pm First, a disclaimer... I work for a bank as a lender I have been reading the posts and my customers are tending to hedge bets each way at present by Splitting their loans. Splitting the loan is simply having some of the lending on fixed and some on variable. There may be a fee associated with this such as a Loan Split Fee. You can split at any percentage however as a general rule I have a discussion about what customers think they may want to pay off in the fixed period. For instance if you have a $350,000 loan and you think you could chunk off additional payments of $50,000 over 3 years. I would fix the large portion of $300,000 and keep the $50,000 flexible. Taking full advantage of the great interest rates but keeping flexibility for chunking away at the debt with extra payments from Tax return money, bonuses, lotto wins! The reason for this is that generally the fixed portion has a restriction on the amount of additional repayments you can make each month without penalty. The fixed portion will not have a redraw facility if you make additional payments however the variable portion usually will. (So if you pay extra and want to take some back out for a holiday or a car, you can). Also, ask yourself the question: Will I have any major life changes in the fixed period. If fixing for 3 years .... do you think you may sell the property, might you move interstate, might you start a family and have a reduction in income???? The reason I ask is if you need to break your fixed rate you may be up for a large break cost. Don't fix if you are unsure or fix for a lesser period of time. Hope this helps Re: Views: Fixed Loan Vs Variable ? 5Jan 17, 2013 2:38 pm we went 100% variable, main reasons are that we can 100% offset and I'm pretty sure rates can continue to drop. keep in mind that most banks will let you change between fixed and variable, so I figured if we start seeing a interest rate hikes that we'll just fix it. Slooowwwwly getting a Manhatten 35 in Middleton Grange Re: Views: Fixed Loan Vs Variable ? 6Jan 17, 2013 2:51 pm It's risky. One of my friends fixed for 3 years and then the rates dropped. His interest rate ended up being 4.5% pa more than ours when we got our loan and even when the rates went up again they still didn't go as high as the rate he fixed. So his repayments were high and if he had stayed with variable he could have kept the repayments at that level but paid off more of his loan (therefore paying less in interest over the life of the loan and shortening the life). Another friend split her loan and fixed part of it but as pp mentioned you are then stuck with the loan for the life of the fixed portion (or hefty fees to break). I think she had the same issue with the fixed portion being higher interest rate in the end than the variable portion too. I will always stay with variable and just pay as much off the loan as I can afford or put as much in the offset account as I can to reduce the interest I pay and the life of the loan. Interest rates go up and down so there are swings and roundabouts and no one can predict what may happen in 5-10 years. It's a personal choice though. Re: Views: Fixed Loan Vs Variable ? 8Jan 17, 2013 3:03 pm It probably is about $500 to fix but it isn't a set fee to unfix the loan. If rates drop after you have fixed your loan to break it the bank will charge you to break which includes lost revenue due to you getting a lower rate after you go variable.
I think some of it comes down to personal circumstance. If you need to guarentee for a few years of repayments then you fix and know that rates may go up or down but you are certain of what repayments will be. So different people will out value of one or the other based on their circumstances. Re: Views: Fixed Loan Vs Variable ? 11Jan 17, 2013 4:19 pm I read somewhere a while ago that as a rule of thumb, when banks are offering fixed rates lower than variable rates, don't fix, because they're expecting rates to drop further. When banks offer fixed rates higher than variable rates, they're expecting rates to hike up. Makes sense to me... we will choose variable when we buy soon, and maybe look into fixing some of it when rates go up later on. Re: Views: Fixed Loan Vs Variable ? 13Jan 17, 2013 7:46 pm travelbug Most of the time the bank wins. Yup. Historically, it is a small minority of people who are financially better off because they fixed their loan. Fixed rates are basically the lender wagering that rates will stay lower than said fixed rate; they don't make those decisions without a lot more information than the average borrower. If it is repayment certainty that you want, well, I was with NAB and my repayments didn't change with my interest rate, it just varied how long it would theoretically be until it was paid off. St. George (prior loan), however, the payment shifted every-time the interest rate did. So if that is the motivation for fixing, check with your lender first! Land settled May '14. Building the PD Hoffman39: 5/11=site start, 13/11=slab pour, 26/11=frame complete, 10/12=roof on, 12/12=bricking started. Blog: http://jyndeira.net/blog/ Re: Views: Fixed Loan Vs Variable ? 14Jan 17, 2013 10:06 pm MR2 they came back... $500 to fix, then a few thousand (not set) to unfix The price to break the fixed loan is called an economic cost and is not 'fixed', it depends on the IR at the time of breaking. Basically you will pay an amount the bank would have earned should you maintain the fixed loan. However you may pay nothing, should you fix your loan and variable rates go up. I agree, banks aren't stupid, they will make more money with fixed, unless their cost of funding skyrockets above expectation (not necessarily just because the RBA raise rates). Re: Views: Fixed Loan Vs Variable ? 15Jan 17, 2013 11:42 pm If you are looking for certainty of repayment amounts for budgeting purposes, then fixing can be a great option. However if you're looking for flexibility and/or think that you will be rid of the property in the short term, then definitely don't fix. You need to consider your particular financial situation and how you want to proceed. Need to remember that fixing at lower rates over future higher variable rates doesn't always correspond to an overall cheaper loan. Cheers Tom Re: Views: Fixed Loan Vs Variable ? 16Jan 18, 2013 1:36 pm Thanks guys. I'm leaning towards fixed at the moment. We have been with our mob for many years and get a few discounts because of this. Fixed starts below variable too. So - varibale would have to drop about 100 points to be equal. I have some doubts this will happen - maybe 50 - but 100 is a big drop - if they even give us all the drop ! So, then the term. I'm going for 5 years. The big thing will be in 5 years !!! Hopefully it won't have risen by 5% ... Re: Views: Fixed Loan Vs Variable ? 18Jan 18, 2013 1:44 pm JB1 What rates you getting for Fixed vs Variable? I'm getting 100% basis points off the standard variable. Yes - I was quite surprised by the difference. It would have to drop by over 100 points before I had a worry - and this is a big drop. I can see one or two more drops - eg 25 points each - but 100 points ? Either the banks know something - or there are just guessing like us Re: Views: Fixed Loan Vs Variable ? 19Jan 18, 2013 3:43 pm Remember some of the difference is also to do with the fact if you fix it means if you come into money you will be charged to pay the loan out early and also you can only make minimal extra repayments. This means they are guaranteed to get interest income for the next 5 years on your loan, with a variable you can make extra payments which can significantly reduce the amount they can charge you interest on. I hope that makes sense to other people... It does in my head but might actually be confusing! Re: Views: Fixed Loan Vs Variable ? 20Jan 18, 2013 5:01 pm fmac Remember some of the difference is also to do with the fact if you fix it means if you come into money you will be charged to pay the loan out early and also you can only make minimal extra repayments. This means they are guaranteed to get interest income for the next 5 years on your loan, with a variable you can make extra payments which can significantly reduce the amount they can charge you interest on. I hope that makes sense to other people... It does in my head but might actually be confusing! Damn - does this mean if I win Tatts I'll have to pay them some interest ... The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19096 Thank you so much everyone. This all makes a lot of sense. I guess when you talk to a builder who butters up everything to look very polished, you get to start believing… 7 17581 So AFAIk the outcomes of the BAL ratings form part of a clause that allows them to pass these costs on to you. However the more relevant detail is how did it go from 19… 1 9153 |