Hi again everyone,
sorry i have many questions, because i am new to property investing. SO i need you guys to give me some enlightenment.
Ok, so i have decided to go for Interest Only loan, so do i go for Fixed Rate or Variable?
The best one i can find is Variable @ 6.11%, and Fixed for 5 years for 6.45%. Only $400 application fee, no monthly fees.Q1)Which sould i go for?
My homeloan broker suggest i gor Variable, since it is lower, and he said something about it is easier if i want to buy more properties in the near future and need some equity from this current one..(?) and if i Fixed the Rate then i cant “touch” the loan (as he puts it.).
Q2) Are there any indication that interest rates are going up within the few years soon?
WHat are tghe pros and cons of Var and Fixed?Pls enlighten! [|)]
Hi,
sorry i have many questions, because i am new to property investing. SO i need you guys to give me some enlightenment.He who asks no questions gets no answers!
Ok, so i have decided to go for Interest Only loan, so do i go for Fixed Rate or Variable?What’s your intention with the property. If you see yourself selling within say 5 years then I’d stick with variable as the penalties for early payout will mean that the interest differential doesn’t matter.
Otherwise, more generally, to answer this question you need to make a call about what interest rates might do.
Q1)Which sould i go for?Work out the impact on your bottom line profit and work out whether the risk is worth the reward.
…want to buy more properties in the near future and need some equity from this current one..(?)Some fixed loans may allow you to redraw capital repayments but not access equity as this qould amount to a refinance which would mean a loan payout and hence early payment penalties.
Q2) Are there any indication that interest rates are going up within the few years soon?I think that interest rates are more likely to go up than down over the next five years, but this is my opinion. Only hindsight will prove me right or wrong.
Anyone else have an opinion on interest rates?
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
1)the financial broker was saying that with the variable at 6.11% and the 5 yr fixed at 6.47%, i will be “losing out” cos i will be paying 6.47% instead of 6.11%.
2)And his argument is that what really counts is the average % of the interest during the 5 years (meaning if i start with var 6.11% and then for later stages it is 6.9%, it still balance out the 5 year Fixed rate of 6.47%). Plus i cannot access the equuity in a fixed rate IO loan.
3)BY the way does anyone know any lender who can lket me access the equity in a Fixed rate Interest Only Loan without a heavy fee? Pls recommend. At the moment i am leaning towards “Homeside”.
I saw an article by a group that has had a good history of forecasting interest rates and they were forecasting that the rate will be at 10.5% in 4 years.
They were also saying that when rates hit this level there will be blood in the streets for the housing market as people will be selling due to drawing down equity in this low interest rate era to fund doodads.
At the end of the day it is up to you whether you take fixed or variable. You can pay more when fixed but think of it as insurance against rate increases. One thing I notice with mortgage brokers is that they will never guarantee anything in regards to interest rate movements. So if they recommend variable over fixed and you lose out due to an interest rate spike, there is no guarantee provided by them that they recommended the best product. Once they have sold you the loan, that’s the end of it.
I use IO fixed loans because as Robert Kiyosaki says “Don’t Predict”.
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