Is this a better option?

[padfoot22]

Hi,

I got a situation where I'm unsure if I should move my loan or stay with it. I'm looking from the view that IR will likely go up than down at the moment so was thinking of fixing. But I have this dilemma if I should move or not out of the loan to a fixed loan.

Got a 350K loan at 7.90% variable. Unfortunately, the lender has fixed loans that is higher - 8.26% cheapest at 2yrs. So I was thinking of going else where for a fixed loan. The problem is the loan isn't more than a year old and the break fee is this deferred admin fee of 1.80% of the original loan (ouch).

Am I better off staying and taking the hit of another IR likely to come or is there a fixed loan that is cheaper than could offset the fee release?

Appreciate any feedback.

 

[GZM]

Hi Padfoot

Just based on those numbers, it doesn't sound like it'd be worth switching. You'd be forced to pay about $6,000 in "break fees", and (even if you got a fixed rate of around 7.6%, which is about the lowest I can find going around at the moment), you'd only be saving around $1,000 a year compared to your current variable rate.

On another note, trying and "beat the banks" by fixing rates and trying to anticipate future rate changes is tough...I'm a massive fan of fixing, but more for the comfort/insurance factor. I do it almost recognising or accepting that I'll be paying more for it in the long run. For me, it's not a price thing, it's a comfort thing.

Personally, given those numbers, I'd be sticking with the variable rate you've got.

 

[padfoot22]

Thanks GZM.

Now I know what it meant by flexibililty and portability of a loan. I guess I have to ride it out. Just makes it harder to get the next IP sooner.

 

[Spectre]

maybe i missed something...
where did the costs get figured out in post #2?

 

[Rolf Latham]

Hiya

interesting question that right now I cover 5 times a day with clients

is fixing for 2 years a risk management tool or a medium tem liability >

fix today at 8. xx and look at 10 % in 2 years time ?

where are we in the current rate cycle ?

ta
rolf

 

[Spectre]

yeah
to be clear
still trying to figure out where 6000 came from.

thx
Richard

 

[mortgageman]

Hi Luke,

1.8% break cost and $350k loan. 1.8% x 350,000 = $6300. Hope that clears it up for you.

Kind Regards,

Cameron Perry
Perry Financial Strategies

 

[Spectre]

Considering I didnt know (& still dont) the lender yeah its much clearer. Will take your word for it though.....