Hi All,
I recently purchased an investment property in 2007 for $300,000. I fixed the mortgage (principal and interest) at 7.1% for three years and as the fixed term is about to expire i am unsure if i should:
1) fix for a further 3 – 5 years
2) go variable.
3) split and use both fixed and variableAny help would be greatly appreciated.
Cheers!!
It would be nice to have a crystal ball. Variable interest rates have risen between 0.75 and 0.95 depending on who you are with. On my discount there is still a gap of about 1.5% between current variable and 3 year fixed interest rates.
So on $300,000 the difference for 3 years between current variable and current fixed is $13,500 over 3 years.
So eg to break even by fixing you would be anticipating variable interest would increase 1% early next year, 1% at the beginning of year 2 and a further 1% at the beginning of Year 3. The slower the increases next year the more interest rtaes would have to increase in later years to come out in front by fixing.
On the other hand sleep at night factor is a big thing too. Current fixed are close to what you have been paying.
I fixed $350 a few months ago at 6.35 and took a punt on $130 variable on the basis if variable went up 3% I'd have difficulty, I was prepared to pay potentially $3,000 odd per annum for peace of mind.
Looks like you totally misjudged when fixing 3 years ago. Rates have been much lower than 7.1% for most or all of that period. So fixing again now may catch you out again.
I personally never fix now as I find you can never predict it correctly and it ties you down too much and you can miss out on opportunites – moving banks and accessing cheaper rates and equity etc.
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
One can only guess ofcourse and hope for a time machine but this may help with predictions as of today, that will obviously change as time goes on:
http://www.domain.com.au/Public/Article.aspx?id=1260034324287&index=NationalIndex&headline=Home_rates_++39;to_hit_8.5%++39;
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