"Fixed, Variable or Split Loan?"

From: Andrew S


After searching the archives I have not found a discussion that answers my question.

I am interested to hear what people think about whether to go for a fixed interest rate loan or if a 'split loan' with half fixed and half variable is the way to go?

Interested in hearing peoples thoughts.

Andrew
 
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Reply: 1
From: Even Steven


As interest rates are dropping I'd stick with variable. If rates start rising I'd fix it. That's just me.
 
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Reply: 1.1
From: Robert Forward


Sorry to tell you guys, but...

You've already lost out on the best deals for fixing your interest rates. Most the major banks raised thier fixed interest terms a few weeks ago.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.1.1.1
From: Robert Forward


Rolf....

Rolf....

Rolf....

Where are you Rolf. There is a question to answer.

Hi Even, just asking our residential mortgage broker to give us the current rates.

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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Reply: 2
From: Rolf Latham


Hi Andrew

As with all things - it deoends heheh.

In the medium to long term to you are usually better off financially with a variable rate.

Fixed rates are nothing more than an insurance policy against rising rates.

If you can afford to go 6 to 18 months with rates running in the 9s to 12s then you can probably take a punt on the variable.

A 50/50 is an each way bet where you could still lose your shirt.

There is really no right or wrong on this one, comes down to managing your risks, being mindful that getting out of fixed rates may be very painful.

Perhaps if you could tell us a little more about where youre at we could help a little more

Most of my clients are taking all variable on most of their personal debt where that debt is smallish. Bigger exposure and you tend to become more conservative.
Ta

Rolf
 
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Reply: 2.1
From: Funky Whuff


Then of course, there could be another major calamity/terrorist attack/disaster.... (because mind you, Osama has escaped - surprise surprise!) and interest rates could very well drop once more... i believe if my memory serves me correctly that fixed interest rates were on the way back up before Sept.11... I'm happy with a variable rate at the moment with the current global instability... just a thought (though pessimistic and hopefully not to eventuate... :)...
Funky


Q. Why aren't physios good in bed?
A. Because they normally get the swelling to go down...
 
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Sim

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Reply: 2.1.1
From: Sim' Hampel


Hey Funky, is appending the same crude joke to every post you submit really necessary ?

 
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Reply: 2.1.2
From: Les .



G'day Andrew,

Some good points there from Robert and EvenSteven - some of the "not so obvious" points to be considered are:-

1. If you have plans to sell, make sure your Fixed Loan doesn't extend past your chosen sales date.

2. Even if you DON'T have plans to sell, could anything shake you hard enough so that you MUST sell?

3. Since banks allow you to go Fixed at no cost, but charge EXORBITANT rates to break out of Fixed, who do you think is winning?

And, after personally going thru a "break" experience, let me say that the Break Cost was more than DOUBLE what I had expected (after calculating their loss in allowing me to "escape" from the Fixed).


There's a good article in the current API magazine (Australian Property Investors) - pick up a copy and have a good read.

Are Fixed rates worthwhile? It's an individual call. To me, with Interest rates this low, they could be (but probably only longer term, IMHO). Some people are prepared to pay a premium (insurance?) to be sure their costs won't rise. Is that you? Since you are looking at 50/50, maybe it's half you ;^)

Regards,



Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 2.1.2.1
From: Jeremy Laws


Three pieces of advice.
1) Go Variable
2) Go Variable
and finally, last but not least
3) Go Variable.
This is advice from me, ratified by three seperate and unrelated personal bankers from three major banks.
 
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Reply: 2.1.2.1.1
From: Rolf Latham


Not everyone has your cashflow to ride out a short spike in rates JL :eek:)

Ta

Rolf
 
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Reply: 1.1.1.2
From: Crystal .


Hi Even,
Please go to the Your Mortgage Magazine website at http://www.yourmortgage.com.au/rates/
to investigate interest rates using any variable. eg fixed/variable owner occ/investment loc/all in one etc
Hope this helps,
Merry Christmas to all,
Crystal
 
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Reply: 2.1.2.1.2
From: Kevin Forster



One thing that you need to decide is whether you're going to have a P&I loan or an IO loan.

I don't think long term fixed P&I loans are worth it.

Fixed loans have the advantage that you can budget one of your biggest expenses into the future. Fixed loans generally are higher than the current variable but call the extra interest cost insurance.
 
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