Home loan products - suggestion required

Hi,
I am new to the forum. I would like to get some idea from experts here. There is my story below:

I lived in Perth and I got a house which is not under any mortgage there. I've just relocated to Sunshine Coast, Queensland for work this year. I would like to buy my 2nd property in Sunshine Coast. My budget will be around 500k - 600k. I am struggling whether I should go for a fixed rate home loan or an offset account with variable rate home loan. I can see the interest rate is historical low at the moment. It's very attractive. However, if I take offset account with variable rate, it will be like more flexible to pay off the loan.

Can anyone give me any suggestion about the product of home loan, please? I would like to do more research before talking to the mortgage broker.

Cheers,

Marco
 
Hi Marco,

Generally, I would not look at fixed rates over variable unless there was a reason to that does not involve cheap rates - for eg, if you need surety in your repayments for whatever reason, fixing can be a good option. If it's purely a money saving question, I would go variable every time.

A fixed rate can become very expensive if something comes from left field and you need to make changes to the loan/sell the house etc.

You don't want to give up that flexibility just to 'potentially' save a couple of bucks.
 
A fixed rate can become very expensive if something comes from left field and you need to make changes to the loan/sell the house etc.

You don't want to give up that flexibility just to 'potentially' save a couple of bucks.
I can see the logic when you're fixing at 6 to 10%, and rates could potentially drop significantly, and you'd incur huge fees to break, but is there really such risk attached to fixing at, say, 4.5 to 5%? Is there really a significant chance of variable interest rates dropping to 3% or lower?
 
It's not so much the risk that rates will drop further, more the break costs if you need to sell or refinance or similar. There doesn't have to be a huge drop in rates for it to get exxy.

But that said, rates could drop further than anyone expects - how many of us have locked in rates at what seemed low (and was), only to have that low rate suddenly seem very expensive?

If it's all about rate, and rate only, I'd stay variable. If fixed is appealing at these levels, I don't see any harm in waiting until we see the first rate rise - or at least banks not racing to the bottom on pricing.

If pricing starts to become less negotiable that might start signalling it's time to think about locking in, but that kind of restraint is not evident yet.
 
I can see the logic when you're fixing at 6 to 10%, and rates could potentially drop significantly, and you'd incur huge fees to break, but is there really such risk attached to fixing at, say, 4.5 to 5%? Is there really a significant chance of variable interest rates dropping to 3% or lower?

I wouldn't say that its that implausible that rates could continue to move south, will just depend on data and how the economy ticks along over the next 12-24 months.

In terms of fixing rates, i always view it as risk mitigation tool. Also the pricing differential becomes a little more noteworthy when your at higher LVRs and with a lender that charges a significant interest rate premium on it.

Cheers,
Redom
 
If it's all about rate, and rate only, I'd stay variable. If fixed is appealing at these levels, I don't see any harm in waiting until we see the first rate rise - or at least banks not racing to the bottom on pricing.

If pricing starts to become less negotiable that might start signalling it's time to think about locking in, but that kind of restraint is not evident yet.
Thanks, Jess, makes sense. :)
 
By the way, if one of you mortgage brokers - or other finance industry people - could just say "now" to the rest of us when it is time to fix, that'd be mighty handy, ta. :cool:
 
I can see the logic when you're fixing at 6 to 10%, and rates could potentially drop significantly, and you'd incur huge fees to break, but is there really such risk attached to fixing at, say, 4.5 to 5%? Is there really a significant chance of variable interest rates dropping to 3% or lower?

When rates dropped below 6% I didn't think they could go much lower. At that time fixing looked like a good option.

The 4.99% 5 year rate on offer with most lenders last year looked pretty too. 5 year rates are now quite a bit lower.

I've come to the conclusion that trying to pick rate movements is a suckers game. Australia's top economists at one point were predicting a rate rise by the end of 2014. It seems to me they can't get it right more than about 3 months in advance and even then they still get it wrong. Last month very few predicted the RBA's "hold" announcement.

Instead, better to understand your short, medium and long term goals for flexibility reasons Jess has outlined very well. Understand your cash flow and consider how you'll fell if they go up or down.

The only thing certain about fixed rates is that you'll know what you're paying for a defined period of time. The rest is speculation.

Incidentally I do have a running list of clients to call when I think rates are going to turn. I just hope that I'll be right on that day. :cool:
 
Thanks for your reply, everyone. Your reply has given me a lot of idea. I have got the other question. One of the mortgage broker told me I could refinance my property in Perth and put the money into the offset account. He said the interest rate would be lower because the loan amount was increased. Is it a good way to get a lower interest rate?
 
Thanks for your reply, everyone. Your reply has given me a lot of idea. I have got the other question. One of the mortgage broker told me I could refinance my property in Perth and put the money into the offset account. He said the interest rate would be lower because the loan amount was increased. Is it a good way to get a lower interest rate?

You will get a lower rate due to increased volume

BUT get specific tax advice on what you put where

could be very expensive

ta

rolf
 
I don't really know under what circumstances my tax will get affected. Can you explain to me,please?

There are lots of issues where you could end up with an in advertant issue

one could be borrwing from the Perth equtiy, and placing that into offset against the new PPOR, and then also mixing salary and wages and living costs ..........

ta

rolf
 
By the way, if one of you mortgage brokers - or other finance industry people - could just say "now" to the rest of us when it is time to fix, that'd be mighty handy, ta. :cool:

try just after the first or second variable rate increase, just as the fixed rates start to increase. don't worry if you miss the first increase on the fixed rates, over time the second one will be 'in the money' for longer anyway.
 
Top