Fixed loans are quite attractive at the moment, with most banks offering two year fixed rates for under 4.99 per cent and some going as low as 4.59 per cent. With rates so low, I think it’s worth considering.
BY JAMIE MOORE
Property markets are on the rise in most capital cities, especially Sydney and Brisbane, and in my opinion it’s only a matter of time before rates start heading up.
However, before fixing your loan, there are a number of things to consider.
Firstly, consider keeping some of the loan variable. That way, you can still take advantage of flexible features that are common with variable products such as extra repayments, redraw facilities and offset accounts. Keeping a portion variable also hedges your bets a little.
The variable portion of your mortgage should also be large enough that you don’t find yourself being able to pay it off during the fixed period, or offsetting the loan balance. A common fixed/variable split is 70/30 – but everyone’s circumstances are different so it’s always a good idea to chat to your broker about your individual situation.
When fixing your mortgage, it’s sensible to go for a two or three-year period. There are usually high break costs associated with fixed loans, which means if you decide to close down the loan during the fixed period, commonly due to selling the property or refinancing, it could be very expensive.
I recommend three years as the upper limit. Most people have a good idea as to whether they’ll need to sell/refinance during that timeframe.
If you’re considering fixing your loan you need to act fast. Unlike variable rates, fixed rates can move overnight, with no warning from the lender.
Jamie Moore is the owner of Pass Go Home Loans (www.passgo.com.au), a mortgage broker firm specialising in sourcing and correctly structuring finances for property investors across the country. He can be contacted on 1300 656 299 or info@passgo.com.au
