I received a Wizard Home Loans newsletter – and in reference to fixed rate home loans, they state:
“The other disadvantage of fixing is you lose the flexibility of variable home loans. Having a flexible home loan can help shave years off your loan, and in the long-term significantly reduce the amount of interest you pay.”
I cannot see how having a variable rate (instead of fixed), can shave years of your loan… Especially since some fixed rate loans are still at a lower interest rate than variable ones. I mean, if your fixed rate is lower for say, 3 years – and you pay more than the minimum repayment – haven’t you saved more money than if that loan had been variable for those three years (and probably had a few interest rate increases?
It also crossed my mind that in the beginning of your loan, you’re paying off nearly all interest and no principle. Wouldn’t it be better to have a fixed, lower interest rate for as long as possible?
Allan
On some fixed loans, there are penalties for paying extra over a certain amount.
Also, many fixed loans do not allow a 100% offset account to be linked.
One more point for variable is, what if you want to change lenders mid way through a fixed loans? Maybe to be able to borrow more money for a new ppty. If you have fixed, there could be large exit fees.
Terryw
Discover Home Loans
Parramatta
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Thanks, Terry…
The other thing Justallan is sometimes the variable rates come down too though
so if yr fixed at what is a lower rate now there is a possibility during the life of the loan the variable rates may come down lowerRegards Luke dematio
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Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Thanks – I knew of that one but discounted it (for the time being), since it’s unlikely interest rates will go down. All the talk in the media = same for now, but eventual increase.
(And we know if the media keeps bellowing about something, people eventually believe it and follow.) [eh]
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