Hi all – well, from discussions with several agents, the value of our unit is now well below our mortgage amount, so we are going to rent the unit, and rent somewhere ourselves, with an additional bedroom for the expected bub.
I now have to decide how to best structure the mortgage. I am currently on an I/O basic variable..6.62% (6.64% comparison).
Is it now best to fix the loan for 3-5 years, I/O…or stick with the variable rate?
I’m concious that the next move on rates is more likely up than down, so want to limit the repayment amount for the time we rent the unit. I know a variable I/O offset was the way to go for a good few years, tho that was in a period of steady, low rates with not a lot of pressure..things have changed slightly now.
So, what do you recommend? We want an I/O loan, with the option to offset our savings (the loan trimmer may be an option). I’m wary of the higher comparison rates on the fixed loans – around 7.22% on a 6.67% rate loan…where does this extra cost come from?
Anyway, I’d appreciate a few opinions…thanks guys.
You have to make a choice on how you feel the market for rates is going to go.
I myself never fix anymore. I was stuck once when I fixed, and then sold a property. Rates had moved, and I had a huge exit fee as a result.
variable is more flexible – what if you want to increase your loan in a years time and your lender won’t lend. You may want to move to a different lender. If you have fixed, then it may be costly to exit.
Terryw
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Originally posted by andymitchell:Hi all – well, from discussions with several agents, the value of our unit is now well below our mortgage amount, variable rate?
Be careful here, not sure if you are considering alternative lenders or not, but if the statement above is correct then I would think twice before doing anything that may require a valuation.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
yes – thats why I’m probably forced to stick with current lender – my banker said they wouldnt need a new valuation if I changed products…so I may have no choice…though I need to decide which of their products I would choose if I did change. I do think rates are on the up, maybe just 0.5% over the next 18 months, and from the valuation of the unit, we would be renting for at least 3 years to get any sort of value back, so thats why I’m thinking fix for 3? I/O?
Try not to refinance – new lenders will need a valuation.
Costs of refinancing may void any savings you might get.
Speak to your banker and tel lhim you are looking to refinance to chase a better rate, unless they can give you a good enough rate to stay? I recently cut 0.5% off my margin loan with one email saying just that.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
andymitchell,
Another option is you could split the loan so you have a fixed component and a variable component. We’ve recently done this on our PPOR. Kinda like having a bet both ways.
Flatout
Do you have any other properties or assets that could be used as security??
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HQ Homeloans
Mob: 0402 BROKEROriginally posted by Blakeb:Do you have any other properties or assets that could be used as security??
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HQ Homeloans
Mob: 0402 BROKERBlake,
Read Andy’s earlier posts to see where this is from. You seem to have come in on the end. Just to answer your immediate query there are no other properties involved or available. Security isn’t the issue here.
After you have caught up on the background then I am sure we will all welcome any insights in how a member of our community can improve his situation.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by andymitchell:yes – thats why I’m probably forced to stick with current lender – my banker said they wouldnt need a new valuation if I changed products…so I may have no choice…though I need to decide which of their products I would choose if I did change. I do think rates are on the up, maybe just 0.5% over the next 18 months, and from the valuation of the unit, we would be renting for at least 3 years to get any sort of value back, so thats why I’m thinking fix for 3? I/O?
Andy,
I assumed that was the case, looks like you’re stuck with getting the best deal possible from your current lender,Fixed, variable or a portion of both?.. after all is said and done only you will make and live with that decision,
Good luck with what ever you decide to do. Cheers.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Hi Andy,
with my FI I don’t have to change products if I want to fix the rate, they just do it. The only time it costs is if more money is required (or you want to from fixed back to variable).
I would think you could get a 3 yr fixed rate (my lender’s is 6.65% at the moment) very close to the variable you are on now so the comparison rate should be the same (unless I’m missing somthing).
As to whether you should do it? As others have said it’s a decision you and your wife need to make, in your circumstance it probably makes some sense but that’s just IMHO.
Good Luck
MikeI doubt you will get a more attractive variable rate than 6.62% – not significantly better enough to warrant the costs of refinancing.
I tend to prefer variable. I believe that over time the banks usually win on the fixed rates. But your situation is different and I can see you welcoming the certainty that a three year fixed loan will give you.
Be sure you will be keeping the unit – fixed rates usually have a higher break cost associated with selling or refinancing.
All the best
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Did you pick up an apartment recommended by Henry Kay?
I did… with my first IP and sure learnt a lot.
Anyway, I turned a bad situation into a positive CF. I furnished my apartment with all new goods. Costed an initial lay out of 15k but the returned an extra $200 pw. 3 months – 6 months ..Short leases but occasionally you get a good one. write off after 30 weeks and goods are still depreciatable over time.
However, I don’t think the apartment has apreciated to my cost yet. Already 3 – 4 years now
I hope this helps.
Regards
ptn
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