To lock or not to..ie the dollar question.

Folks,

Seeking a feedback from SSers...

Soon to settle on our first IP..I have been quoted Std Var 8.74.
I am inclined to lock it in for 5 yrs @ 8.95 instead.
(peace of mind v/s cost argument)

However 2,3,4 yr fixed are over 9%. So 5 yr fixed looks attractive.

1. What are the advantages / disadvantages of this ?

2. What are breakup costs if say interest rates drop to 6%.

3. How do lenders work out these costs ? I am with CBA and they are vague about this.

4. I am on fixed @ 6.xx % for my PPOR and have been happy with it & hence inclined to.

5. One of my mates advises not to..since there may be some issues in refinancing if the IP value goes up. Can't see how..since I simply got a LOC @ 8.69% on our PPOR to put a deposit towards IP. So effectively refinanced did`nt I...or could I have done this better by some other way.

6. What do SSers think of IR over next 5 years ?
(I know banks pay Economists top dollar to work this out...but I am sure SSers are equally smart if not better)
 
I bought my first ppor in Jan and locked it for the first three years.

In my case:

Advantage - Stability.
Disadvantage - Can only pay extra up to 20k in fixed period.
 
Hiya

if you are fixed at 9 for 5 years , and variable drop to 6 in say 2 years using ur example, the exit cost will liley be at least 3000 per 100 000 of loan per year remaining of the term.

So say 300 k loan , 9 k a year for 3 years = 27 000

The best thing to do if you do fix is to make sure you can still pull equity in the future if thats your intention, grill your broker for a structured finance proposal.

ta
rolf
 
Western Suburbs . Prospect. So what are catches with your 55% fixed / 45% vari...?? I imagine repayments change everytime there is IR movement. How have you planned it ?

repayments are locked for 55% of the loan and 45% it can change, i can pay out an additional 10k p/a on the fixed loan and as much as i want on the varie, but if i pay out the fixed loan before 5yrs im up for a $700 fee.

Im paying principle and interest (first property, to build equidy), i plan to pay the min amount on the fixed and put all spare money into the varie.

I'll be reducing debt for the next 12 months, after this period i will approach CBA to see how much i can burrow (next investment will be interest only finance).

Its totally upto you how much u want varie and locked. i asked cba and they said its popular to do a split, mixes security (knowing how much u got to pay) and IR movement (possibilty going down)
 
Back
Top