July 02, 2015
With interest rates being at a historically low rate this is question that many of my clients are asking.
It would be good if we had that magical answer and could foresee the future.
To answer this question you need to ask some more questions about your own circumstances. Such as
1. Am I likely to sell my home soon?
2. Do I currently make extra repayments?
3. Do I use an offset account?
4. Is my budget already tight?
5. Would I be upset if the rates dropped lower?
This will assist you in deciding if it is the right time to act.
The good things about fixing are that you have certainty, you know how much you need to pay. With a mortgage generally being your biggest financial commitment this can be important.
The negative is that often you cannot make extra repayments nor have an offset, however there are more loans coming into the market that offer both of these options with the added benefit of stability. This could be a win win situation for you.
The other major negative is the break costs, if you decide to sell your home in the fixed period the penalty can cost you a substantial amount. There is no way of knowing how much this can be as the banks use formulas based on variables such as what the cash rate was then and now and time left on the loan. This could make the penalty a couple of hundred dollars to thousands of dollars.
There is always another option too. Splitting your loan to get the best of both worlds. Fixed for stability and certainty and Variable for flexibility to assist you with paying your loan faster.
If you want to know more about fixing your loan please call Soula 0414 843 060 or email email@example.com