Worth switching?

[twinkle_star]

With the current low fixed rates available I'm currently trying to work out whether it's worthwhile switching, either to 2 or 3 years fixed rate. Would appreciate some advice please.

We currently have 2 properties, PPOR worth $415k, IP worth $400k with loans about $665k.
The loans are not cross collaterised and we paid $4.5k LMI to fund IP purchase @ 89%LVR in Sept with the balance borrowed against PPOR with a separate loan. Our interest rate is 5.73%.

PROS:
- lower interest rate (possibly ~5.3%), therefore lower repayments
- certainty of repayment amounts as I will be taking 12mth maternity leave from Feb

CONS:
- we've just paid LMI so may need to cross collaterise to avoid LMI again, however this could be ok if we move all our loans again to another lender after the fixed period
- harder to access equity in 2nd or 3rd year if we want to purchase another IP

 

[Peter_Tersteeg]

First put your situation in context. With loans of $665k, a 0.1% discount means you save $665 per year, or $55.41 per month.

With an 89% LVR, you're probably going to pay about $13,000 in LMI to move...

It would also help if you mentioned which lender you're with.


If you're talking switching to a variable rate, then you're probably not going to qualify for the lenders offering the really low rates below 5.5%, given that they require an 80% LVR or lower.

Your existing rate of 5.73% is actually quite competitive. Probably the best case variable rate you could expect would be around 5.65% and given that LMI is involved, a saving of about than $600 a year isn't worth paying upwards of $13,000 in LMI.

If you're thinking about fixed rates around 5.3%, have you looked at your own lender yet? Quite a few lenders are offering about 5.3%. If your lender isn't, you might want to hang in there a little longer as there is a chance they will soon.

 

[Aaron_C]

Probably not worth it since you will be up for lots of LMI so investigate fixing with your current lender as you will more likely be better off.