Hi all,
I know this subject has been done to death, [confused2](sorry), but it is relevant to us at the moment…
Do you think that if you were buying an IP now and intend owning it for approx 2-3 yrs, that you would lock in rates or go variable?? Do you think that it is better to ride it out on variable, or lock in even at these rates?
The lock in rates seem to be only marginally higher than variable.
Any ideas? Pls help as we are telling the Bank Manger tomorrow and are in two minds…
Thanks,
Del
Hi wilandel,
That is a tough question to answer simply because you have said you only plan to hold onto the IP for 2-3 years, and as such, locking the interest in for that time might be a worthwhile option.
But don’t take my thoughts as gospel, the real consideration is the length of time you plan to keep the property as you’ve stated, and the fact that the lock in rates are only marginally better than the variable (for the moment anyway). It really comes down to personal choice.
It is a difficult call, I mean who knows what will happen with interest rates in the next 6-12 months???? Even the experts are divided!!!
Cheers,
Jo
Hi Del,
Firstly it depends on how much you are borrowing.
Secondly, is there any possibility you may wish to reduce the loan or break the term of the loan?One possibility is to split the loan – part fixed interest and part floating, it gives you a dollar each way
Cheers
JeffHi Wilandel,
Personally at the moment I would not fix, but it depends on your level of exposure, and your own comfort level, and the SANF (sleep at night factor,)
Have you considered fixing a portion of the loan?Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Thanks Steven, Jeff & Jo,
I’m glad that it is a difficult thing even for people in the business…
Most of our loans are variable these days, as we are selling a couple of our fixed ones at the moment.. It’s a bummer ‘cos they are fixed at 6%.
I like the idea of a split type loan, because even though the rates are lowish now, who knows what those politicians will do after the election.
Thanks for the advice, (I feel better now)[strum]
Del
Wilandel,
People fix for peace of mind. only you can work out if it is worth the risk of paying more in the long run. Remember the banks set the rate to be profitable according to their forecasts, whilst remaining competitive.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
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.
We all get biulding insurance for our properties. We probably all have landlord insurance. We definately have car insurance. To be certain that a desired outcome will eventuate is it not prudent to “insure” out mortgage also so it cannot unexpectedly increase to an unmanageable level. (unless the absolute worst case scenario is covered).
I think it is not about whether rates will rise or not, because nobody can tell us that, it is about not gambling with your cashflow.
Did that make sense?????[confused2]
Anyway we are still near historically low rates.Hi Wil or Del,
honest opinion, just fix it for first year (reason behind this choice is, most people dont sell in their first year, because they want to be able to sell the property after they are elgible for the 50% cgt discount), after that let it go variable is my chooosing, the reason being is, i dont want to enter into any high breaking or exiting costs with the banks, and that variable rates are normally better than going fixed and you can see that through the history of interest rate rises, variable rates do out perform the fixed users.
one other thing, dont take this serious, its only an analysis from a network stock broker, i deal with, hes saying interest rates by the mid and end of next year will be getting close to the 8.25% mark.
this is only food for thought,
Cheers,
sisHi iamborediambored,
its only food for thought, but ideally for all my own loans, i only fixs for first year, reason behind all this is. If the property goes up in value and you can sell it for a profit, your break and exits costs are much and a heap lower cheaper than someone who is fixed.
other thing too is, most people think you can just fix your interest rates and still be in the ball game…
i try to think out side of that square and try to find ways in reducing my interest rates by getting discounts and find way to improve the property rental… so that when interest rates do fall… my actual cashflow will be much greater, but during the meantime while my interest rates are higher… its my discounts and tax rebates that are working much harder for me.
Cheers,
sisA couple of points to note:
the banks to not set the fixed rates according to what they “think” the rate will be in X years…they go off the money market rate for where they have to lock in funding for fixed rate loans and tehn add their margin. (the rates are published in the AFR everyday)
As for a stock broker telling you that rates will be at 8.25%in 1 year…that is fine and he is welcome to have an opinion but it is a bit like a real estate agent telling you that a ford falcon will have a good resale vaule in 1 year.
Note also that the stcok market guys only know what they are told…interest rate dealers trade interest rates and deal in them every day and they arer saying that rates will be lower than 8.25% next year…in fact the interbank market (where the lenders buy and sell fixed money) has interest rates at about 5.6-5.8% for the next 3 years !!!
Deal, I won’t ever be fixing my rates. I remember aftert the first interest rate increase this year, people were panicking and saying to fix their rate. Go figure- the sky hasnt fallen in, and I doubt there will be any interest rate increase for- at a guess- another 5 months? That’s just a guess of course :o))
I like flexibility. I am happy to ride the wave. No big deal if they increase really, or decrease. it’s part of the risk in being a property investor.
Best of luck with what you decide, Del! Let us know if you like
)kay henry
I was never an advocate of fixed rates until last year when we all saw the only way ahead was up – I fixed my loan at 5.89% for three years and am happy to have done so. I don’t know that I would be fixing the same loan at todays rates tho.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
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.
Hi everyone,
THE OUTCOME !!
We went to see the Bank Manager this morning, and we were able to get a split loan.
It is a commercial loan of $175,000.
50% for 12 months
50% variable.There is a fair chance that we will sell this property after 12 months.
Thanks for all your thoughts and opinions. It certainly helped us to make a more informed decision.
Kind regards,
Del & Will [thumbsup2]
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