Article supplied by Zinger Finance
As a current or potential property investor, you will have realised that interest rates are currently at the lowest levels we have seen for some time, making you wonder if this is a good time to take advantage of lower repayment amounts and have the repayment certainty over a fixed term.
Always staying abreast of the market, here at Zinger Finance we have noticed some of the major lenders’ fixed rates have fallen by as much as 3% - 3.5% over the last five years – levels almost unheard of in recent times. As a borrower, if you want to fix your home loan rate, one of your main considerations should be how confident you are that rates will not fall any further. We tell our clients that the decision is an individual one, based on their specific circumstances and their future plans.
If you are confident that now is the time is right to fix, there are some key considerations before you go ahead.
- Fixed rates are often less flexible, restricting your ability to restructure your finances during the fixed rate term. If your circumstances change, your loan may not, making it difficult if you need to sell your property, relocate or access equity.
- You may lose flexibility if you fix the entire loan. If you are looking for additional investment opportunities, fixing may limit your options should you wish to sell a property, access equity or refinance to another product or lender.
- Some extra repayments may be permitted on lender’s fixed rate loans, but you will be prevented from paying the loan out entirely without having to pay a break cost.
- Find out about the comparison rate. This is the loan rate inclusive of its ascertainable fees and charges – sometimes these fees and charges make the loan less attractive.
- Make sure you fully investigate and understand “rate lock” options. This feature guarantees (for the “locked” period) the application rate will be the same at settlement, but does bring an additional fee that may offset the benefits.
- We suggest that to get the best of both worlds, you could consider fixing only a portion of your loan and leaving the rest as variable, to provide some flexibility. This means you won’t be limiting your options should you wish to refinance to another product or lender.
At Zinger Finance, we have one key piece of advice when it comes to fixed rate loans - a fixed rate loan is not simply about setting and forgetting. Ensure your lender will notify you when your fixed rate term is due to expire. They should let you know your options with regards to either choosing a new fixed rate term or renegotiating your loan to another rate or type. However, if you fail to provide new instructions, it is likely that your loan will automatically roll over to the prevailing standard variable rate. This may be considerably higher than you would be able to otherwise negotiate, so it is absolutely vital you remain on top of your affairs when your fixed rate is about to expire.
The final word from the team at Zinger Finance is that we believe it is a good time to consider fixing your home loan rate. Although nobody can predict whether rates will continue to fall, we feel there is less downside risk in fixing at the current lower rates, than at the higher historical rates.
If you need help to make the right choice for your personal finance strategy, call Zinger Finance on 1300 367 925 or email me firstname.lastname@example.org.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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