Fixed Term I/O Loans



From: Peter Boyce


I have only recently found this terrific forum after reading Jan's latest book ask the following -

I have a few IP's that I am comparing with the intention of purchasing one. I am researching my finance options (after having a preliminary discussion with my bank manager) and would like to get some feedback on the usual fixed term durations that investors in property generally prefer.

The reason I ask this is that in some of the archive material I see that durations of 10 years fixed have been mentioned which is twice as long as my bank have advertised. Having a loan term fixed for that duration definitely sounds appealing, however, a lot can happen in that time frame both personally and economically. As this will be my first step into the investment arena I would like to make as few mistakes as possible.


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Reply: 1
From: J Parker


You can get fixed loans for periods up to five years fairly easily. After that, however, you are still able to re-negotiate another fixed term. I would be interested in hearing from investors who have done this successfully- going onto another 5 yr term (for example) at the end of the first one. Is it relatively easy to do?
Cheers, Jacque :)
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Reply: 1.1
From: Gail H

I don't think I would go for 10 years. It locks you in for a bit too long, and the rates are a little too high for my liking.

I favour 3 years.

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Reply: 2
From: Rolf Latham


Be aware that most of the 10 year fixed rates are in fact Principal and Interest loans, not the interest only type favoured by most investors.

ANZ have just upped their 10 year rate to an interest only option, at near 8 % though its not cheap when the base variable is at 6 %.


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Reply: 2.1
From: John P

Peter I have nothing against fixing part of your loan; I have done it myself although it was only for a 3 year period. If you fix for 5 years or more, and you need to sell, depending on the loan amount that is fixed, you could be up for "enormous" break costs. Remember by fixing, and then trying to get out, you are essentially trying to break a written agreement...and you are right...... a "LOT" can happen in 5-10 years.

Hope this helps


John Poulos
RESI Home Loans REP
0412 588986
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Reply: 2.1.1
From: John Fewster

Ive just re-fixed for another 5 year term. A letter came in the mail 2 months before it was due to run out. I simply signed and returned. I would not recommend going for the 10 year term for the same reasons mentioned above. The break costs could be very expensive if you needed to sell for any reason. Although some banks use different formulas for calculating them. A lot can happen in 5 years let alone 10.
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