We are building a new home to rent out should we get fixed interest rate or variable?
fixed and variable is usually a security factor for people who are concerned with risk.
In my experience the more seasoned buers invariably choose variable whilst people just venturing int property inestment take the fixed option to help with their sense of security.
There is no right or wrong choice.
If you have an exising home loan then I would strongly encourage you to go IO until that is paid off. Remember that only the interest component is deductible. Better to reduce the non deductible debt twice as fast and maximise the deductible debt – remember the total loan is being paid off at the same rate in this case.
If you have no other non deductible debt then it is really a personal decision. Many people like to see the loans being paid down.
Hope this helps,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985NODOC Loan – 65% Loan – No questions asked! 6.85% Rate!!
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Dreamreal,
As to whether or not fixed or variable is the correct choice it really depends.
Fixed rates address the sleep at night factor and provide surety of payments over the fixed period. This is particularly useful if you are on a limited budget, your worry endlessly about cashflow and so on. The decision to fix generally relates to the need to know what my repayments are basis.
However be aware that in the long term banks usually win the fixed rate gamble and if you try to break out of your fixed loan before the period of fixing finishes you could well be up for significant break costs – dependig upon market rates and how far into the loan you are when you break.
Variable rates are generally lower, especially if you get a basic variable without frills and allow greater flexibility.
Ultimately the best choice for you depends upon your circumstances.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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