Fixed vs variable for new IP

[gw83]

Hi,

Just considering our IP strategy going forward...we are hopefully close to purchasing our second property (pending finance approval)....in regards to the loan, we were considering fixing part of it (say half) for 3 years and have the other part (half) variable, however does this mean that we will not be able to access equity in the property during the period in which part of the loan is fixed?

If so would we be able to access equity from part of the property or not at all?

If fixing (even part of the loan) eliminates accessing equity then we would probably go with variable, as our intention is to keep buying property over the next few years.

Thanks!

 

[Peter_Tersteeg]

If you've got a fixed loan, you can always access your equity be setting up a second variable loan along side it. Given you're thinking of keeping part of your lending variable, you'd only need to do an increase on the existing variable loan (assuming that structure is consistant with the use of funds).

Fixing doesn't preclude you from accessing your equity, but it does tend to commit you to that lender. My suggestion would be to understand your borrowing capacity and increase related policies with that lender before committing, to ensure you're not in a position where you need to move to access future equity.

 

[Rolf Latham]

Hi,

Just considering our IP strategy going forward...we are hopefully close to purchasing our second property (pending finance approval)....in regards to the loan, we were considering fixing part of it (say half) for 3 years and have the other part (half) variable, however does this mean that we will not be able to access equity in the property during the period in which part of the loan is fixed?

If so would we be able to access equity from part of the property or not at all?

If fixing (even part of the loan) eliminates accessing equity then we would probably go with variable, as our intention is to keep buying property over the next few years.

Thanks!

hi GW

Subject to normal criteria such as valuations serviceability lenders mortgage insurance blah blah blah blah blah, you can pull equity with most lenders, even if all your loan is fully fixed.

All you do is you apply for a variable-rate loan on top of the fixed loan.

If your loan is above 80% loan to value ratio you might find it a bit tough to pull equity anyway, but in general are fixed loan is not prevent you from pulling equity

thanks

Rolf

 

[gw83]

Great, thanks for the replies!