I have recently been doing a fair bit of reading and Am feeling that I may have backed myself into a tight corner…
I currently own a inner city unit with 20% equity and 40k in my offset. I am just about to take on a 2nd place which has been valued by the bank at 420 and as it’s a favoured sale will only have to pay 320. My mortgage broker has set me up with a fixed rate loan for 3 years at 6.95% which initially I thought was a good thing as I am already paying 7.3% on the unit. However my gut feeling is starting to tell me that this isn’t so good as want to buy a lot more property in the future this may prove to be too conservative too early in the game… Trouble is I already have the loan acceptance papers but as yet I haven’t signed… Is it to late to back out?
Oh and the broker is a family friend so I don’t want to burn him…too badly anyway…
Any advice and words of wisdom are greatly appreciated:)
champy
My advise is to never do anything in regards to finance that you are uncomfortable with. If for whatever reason you don’t want to proceed you have every right to put the brakes on and take the time you want to explore all your options. A mortgage is a serious commitment and you don’t want to make hasty decisions. You are not fully committed to the loan until you sign the actual mortgage documents after the bank has issued formal approval.
Interest rates are not the only things you need to look at when signing up for a loan.
Perhaps more importantly are any deferred loan establishment fees, break fees, early payment fees, loan establishment fees, valuation fees, loan portability, offset accounts (although you already have an offset acocunt on one propoerty so probaly no need for another one) etc etc etc.
You might find that when considering all of the different fees, charges and features of a loan product that one with a higher interest rate is the better than another with a lower rate.
Cheers,
LukeI never take fixed loans because of the loss of ability to move easily.
But it is not the end of the world. You can still access equity with the same bank, set up a LOC for example later on.
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
Terry has a good point about setting up an LOC or using any equity gain.
What you need to think about is tactics.
Are you a buy and hold investor for a longer term time period.You could split the loan up which goes something like below
30% of loan fixed for one year at whatever interest rate.
30% of loan fixed for two years at whatever interest rate.
30 % of loan fixed for three years at whatever interest rate.
10% of loan variable at whatever interest rate.
this is an averaging of the interest rate while giving you flexibility to decide in a years time when the fixed rate on 30% finishes on if you want to fix the 1st portion for three years or go variable on 40% instead..Servicing the loans is the factor that may stop you buying another property in the future.
You also need to take of your home owner thinking hat off and put on your landlord investment loan hat.
Remember that the rent and tax deduction refund help to pay the investment loan.
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