If it ain’t broke, should you fix it?
With interest rates low, and house prices increasing – what is better – fixed or variable interest rates? Remember, Property Friends is not a financial advisor, so before you make a final decision on your mortgage, please speak with a registered mortgage broker or your finance advisor. In the meantime, due to the number of enquiries we’re receiving on the topic, we’ll provide some info to get the ball rolling for you!
If you’re tossing up between fixing your mortgage or not, you should first consider your property goals, budget & overall personal preference. Most believe that interest rates are just about as low as they can possibly go – or are they? We’ve heard many people who have been told this before, yet rates continued to tumble.
Interest rate cycles of the past have taught us to take nothing as gospel. It’s so important to understand the pros and cons of fixed rate loans. These vary according to your circumstances. Before you make any decision, here’s some factors to consider:
- Do you intend to sell the property during the fixed rate turn?
- Do you want to make extra repayments onto the loan during the fixed rate term
- Are your circumstances likely to change which may affect your cash flow that may force you into selling your property – ie: loss of job, starting a family. A bit of crystal balling here – but an important consideration.
Investors can benefit from fixed rated loans in a number of ways, including budgeting for repayments and maintaining consistency with these. However, the inflexibility of these loans often extends past the fixed interest rate. Often extra repayments are restricted, offset accounts are not offered and if you do sell or refinance during the fixed rate loan term, you may be up for thousands in “fixed rate break costs”.
Fixed interest rates are coming down. Just check out the current range of rates available online [or with your finance professional]. Some are only 3.69% for 1yr! [4.26% comparison rate] Do you know what interest rates you are paying on your current loans or credit cards? Consolidating is a great cash flow strategy for all clients who are in a position to do so.
Once you’ve read our article, take a look at the fixed and variable rates that are currently on offer. Consider the pros and cons and what you want out of a loan. Talk to an expert to understand if fixing your rates can save you money and help increase your returns!
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Property Friends is a specialist Property Investment Strategist that provides solutions for people aspiring to financial independence, choices in retirement, or leaving a legacy. www.propertyfriends.com.au (03) 9758 5331