Home Loans

[aardvark]

I know a few of you good folk either work for banks or keep a keen eye on such things.

3 years ago we fixed our interest rate for 3 years at 6.49%. In hindsight, should have fixed it for 5 years!! Oh well.

The 3 year period is now up and we are going to extend the mortgage a little. As a result, I've been a little bit to try and see what interest rates are going to do. It all seems to depend on who you ask!! I've also found out that the inflation rate has nothing to do with the speed at which you can blow up a balloon. (Insert your favourite balloon inflation video here).

So, can anyone with an opinion that counts tell me what they think, have heard? Because the big question is.... refix it, for how long, or leave it as a variable loan?

[esie]

Aardy, I am presuming here that you fixed your home loan at approx 6.47%. (I figure this because mine also comes off a three year fixed period next month, drat blast!)

The current standard variable interest rate, 8.72%, but I am sure that being a police officer you would be eligible for a professional package of some form,
no doubt with a 0.7% interest rate discount. Just about every bank now offers a similar package for usually about a $300 conversion fee. This would lower your variable interest rate to 8.02%.

Now, this brings me to the current fixed rates, currently about 8.49%.

If you were to be choosing between the discount variable rate, and the fixed rate, a couple of points spring to mind. 1) The fixed rate is higher than the discount variable, therefore until if and when the variable rate goes up a few more times, you would be paying more, and 2) The variable rate would have to go up twice more for you to be equal with the fixed rate, or three times to be higher than the fixed rate.

Of course it is all a gamble! The interest rates tend to be on a five year cycle. When you (and I) fixed our home loans when the interest rates started going up, that was the beginning of the current cycle. We are getting to the middle of the cycle, and depending on inflation, we should see a flattening out and maybe drop of the in the next year or two.

Personally, I am going to keep mine on the discount variable rate of 8.07%.

[Ratmick]

Have a chat to your local Aussie Home Loans guy, they can get better deals with the Banks than you can. They can get a better deal with NAB than I can get (and I work there).

I originally went through the NAB at work and they weren't interested. Bastards .

I then went through the Aussie guys up in Bendigo and they found me a really good deal with Colonial (Commonwealth Bank). I got my place re-valued, the mortgage approved (it was going to save me $180/fortnight), the paperwork in to sign and then the NAB found out about it. The shit hit the fan and then the NAB then found they really were interested in keeping my business and managed to beat Colonial's offer. It didn't impress the Aussie guy at all, but he was ok about it. I felt a bit bad for him, but with Ros gone and one pay packet I need all the pay I can keep.

The Aussie guys are nice guys as well

Mick

[Slow and wobbly]

Labour is back in so now we are all farked.
Best way to do it is bargain your fixed rate before the term expires.
Also helps if you have leverage between the banks. I have X mortgages on home and investment properties along with everyday banking and credit cards all with different banks. It helps with negotiations. They all want the business and so while it takes time and effort it is worth making an appointment with each of them to discuss what each of them will do for you and shows how greedy each of them is just to keep you onside. They look at the big picture and want to convert the lot. Play them off and you get a really good deal. Take the print out's and calculations and offers they put down on paper and watch the next bank wipe some more off that. Go round in a big circle until they finally say they can't match the previous offer and then weigh up yourself who is willing to give the most in terms of no fee's, lower interest rates, amount repayable within 12 month periods, break costs and overall service.
As a comparison our home loan is fixed now for another 3.5 years is at 4.26% ( almost long enough to see out Rudd )- But our investment properties are interest only at 8.6% but entirely tax deductable - Play the game and don't be a sucker.
Home loans are a liability. Pay them out as soon as possible and don't pay too much on interest. Investments are great cause all interest paid towards them is tax deductible and they appreciate in value. But then there is CGT - it's a balance thing.
One day I will be rich and have cash in my pocket Everyday I get up and ask myself if it is today - yet I find I still get in the van and go to work.

Edit: While I was typing all that Mick came in with exactly what I was trying to get across. Don't accept whats on offer! Take your business everywhere not just someplace else! Aussie homeloans are nothing but consultants that do everything that you should do! Research.

[Felix]

Labour is back in so now we are all farked.

Yes, look at how many rate rises we had when they were in opposition and now they're in power!!




Seriously I read an article yesterday suggesting that fixing now may not be much better than riding it out a bit as the banks have factored in what they expect to happen over the next year or so. Most seem to think we will get 3 rate rises by the reserve, and who knows what the banks may do off their own bat*. At the moment variable is still cheaper than fixed. That said we did do 3 year fixed when we bought this house. The gist of the article was to shop around, look at the extras of the contracts, ie fees, charges, flexibility to repay, redraw, etc. The extra hint was that by going fixed, you may end up having to stay with that financier for at least the fixed term lest you be hit with a bunch of early termination fees and charges. So in that case you may lose the flexibility to refinance or repackage your finance in the future.

Only advice I can offer is talk to some of the mortgage brokers and see what's on offer - at a minimum you should be able to shave around half a % off and possibly repackage any other existing loans into something that is better for you. Adelaide Bank actually have a few packages you may be interested in, and ours is through them indirectly - loan is from a 3rd party provider that we got through a broker at the Mrs work at the time. We have a mortgage, an offset account and lower interest credit card all tied up together - it is working well for us.


* I read another article which said the reason for "increased lending costs" had to do with the big 4 borrowing money from the US to lend back to the US Subprime mortgage market!!! They want you to pay for their stupidity! FFS!!!

[Glen]

I think the correct answer mate is no one knows. We get a briefing from the two banks we deal with every week and every week the opionion changes. Their overall feel I think is that there is more upside than downside in the short term ie there'll likely be another one or two increases in the next six months but their view beyond that is a little cloudy. At present we're adapting the view that given that things are a little volatile going short is a better option than long, having said that we very rarely lock in rates for longer than 6 - 12 months traditionally so we're not averse to a little risk.

3 year bond rates have dropped a little in the last couple of weeks ie to 6.5% so that may be an indicator that there is an expectation that rates will come off a bit.

I float all the time but if I were coming off a fixed period I'd probably float for a bit unless you can lock in a deal your comfortable with.

[rooster]

Luckily for me during the dark days I fixed half my loan and ran the rest on variable this allowed me some protection and still be able to make one off payments when the funds were available to knock off major amounts thereby reducing my overall liability. Given that we may be heading for those days again this is the tactic I would look at. The issue with fixed was if I wanted to knock the loan off early or put in a major amount there was no flexibility I either was going to get severely penalised for paying the loan out early or I would lose the flexibility of redrawing if I needed the funds. There are plenty of products out there just remember that most, not all, lender reps are oilier than new car salesman and will/may not give you the best product for your circumstances. The 3 R's apply READ,RESEARCH and READ again.

[StuMiller]

Try a mortgage broker.....

I think you pay a % of the remaining balance to refix at your current rate....

Might be worth doing it for another 2 - 3 years give the US crisis.

[the kid]

Luckily for me during the dark days I fixed half my loan and ran the rest on variable this allowed me some protection and still be able to make one off payments when the funds were available to knock off major amounts thereby reducing my overall liability. Given that we may be heading for those days again this is the tactic I would look at. The issue with fixed was if I wanted to knock the loan off early or put in a major amount there was no flexibility I either was going to get severely penalised for paying the loan out early or I would lose the flexibility of redrawing if I needed the funds. There are plenty of products out there just remember that most, not all, lender reps are oilier than new car salesman and will/may not give you the best product for your circumstances. The 3 R's apply READ,RESEARCH and READ again.

+ 1 , with a fixed portion you know what you need to budget for , and work hard at reducing the variable portion . As Wobbly said , you home loan is a liability and getting rid of it ASAP is the best thing you can do . Not always that easy tho

[hoffy]

Just do a MABO land claim for your whole street...you'll be right mate !

[Neka79]

or confiscate the land...

[Blue14]

For me i will have no one to leave anything to so i am enjoying life now. I am paying off my own home with a large chunk fixed and a small portion variable. I will own it by the time i am in my late 40's hopefully. But one thing i will do within the next 3 years is buy a couple of investment properties so when i retire i will have some decent money.. Then i can live comfortably in my old age and hopefully enjoy my money.

Anyway if your interested Ardy..

I know a very good broker who you could speak to..

They will advise you of all your options and give you some good advice..

If you are keen shoot me a PM and give me your details and ill pass them on as well as give you there details..

They are in Melb but can still help you out as they are linked to a broker firm that is national..

[aardvark]

Thanks to everyone for their advice.

The good thing about forums like this, is that so many of us have more in common than just a love of bikes, and everyone has an opinion!

Our bank has offered us a great deal, without us having to give up anything that we wrangled out of them when we first took out the loan. I'm going to take a punt and fix the lot for 2 years. The best thing about fixing, is that I know what the exact payment will be for the next 2 years, and that helps with budgeting.

Now I've just got to find my new car...... Anyone here work at Toyota and want to buy a car for me using their employee discount??