Can anyone offer some info & comments on this. I have a $275,000 mortgage that still has 29yrs to go. I fixed $225,000 at 8.5% for 4 yrs in June this year with the remainder of it at variable. At the time of fixing we relied on 1 income. Now we have 2 incomes & are regretting our decision of fixing. Would it be worth considering the break cost of $18,000 to get out of fixed rate & revert back to the variable rate?
crunch the numbers and you will soon find out
I agree. Do the figures and work out how much interest you will be saving and how long it will take to save that $18,000.
The longer you leave it the less you save and the higher the fee will be – rates are dropping still.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Marie07 – and welcome to the forum.
It sounds painful doesnt it? altough just imagine how you would feel if rates were now 9.9%…..
While that was quite a high rate to fix in at, its all relative.
Couple of things that may assist with decision making.
1) Is it your own home, or an investment property?
If your own home, unless you fix it in again at the new low rates, or rates go down again, and stay down for at least the next 2 years or so, you should really perhaps just keep paying, and take it on the chest. That sadi, most good lenders allow you to pay extra of a fixed rate loan without penalty up to a certain amount. Why not look at doing that? Even though your repayments wont go down, you will be paying more off your principla, as you will be being charge less interest. Many lenders allow a certain amount extra annually, or over the fixed term. If you have extra money, maybe try that.
2) If an investment property, while it may be a deductable expense, (the exit/break coss) remember as your interest is tax deductable, it does not necessarily give you the same 'in pocket' benefits to get out of your loan, as if it was your own home (and thus not a deductable expense).Try and be objective, and as already mentioned, to the sums before you flush money on break costs that may be better spent elswhere at the moment.
Cheers
As terry and others have said , "crunch numbers"
I'm in similar spot…. some loans locked for 2 years at just under 8%
I think rates will drop downto a low early mid next year for a short few months and then gradually come back up …
I doubt I will save much more than break costs in the two year period remaining even if I picked the bottom and re-fixed for 2 ..
possibly more of a dangerous gamble than a wise investment decision.
It would be nice to pick the interest rate bottom and then lock for 5 years ….. however look at the 5 year fixed interest rates – still quite high.
Also compare some of these low introductory rates which actually have comparison rates that are very high when you look at total fees. wolves in disguise.
I think you may have left the call to break too late marie07, with todays further 1% cut which a lot of financial writers are calling an over -cut. with only minor corrections to follow.
2 – 3 months ago would have been the window of opportunity for those who fixed at 8% plus.
Possibly Yesterday for those who fixed at 7 % plus.
Now I wouldn't bother.
Nasty pill to swallow though, if you had of fixed a few months ago.
However I think anyone who did was possibly backed into a financial corner and had to do so to avoid selling… In such circumstances I still think fixing was the right thing to do at the time.
Unfortunately the correct Investment decision on the day doesn't always end up paying off.
Hindsight sucks.
MY HOT TIP
(anyone on variable loans, lock in a 5 year rate at 6% or better if you can get one in the next few months. History of last 20 years should make this a winner)
You must be logged in to reply to this topic. If you don't have an account, you can register here.
