Call us on 1300 794 893

Your Money

Thinking of fixing?

We are one of those couples who believe in real estate more than shares and we have borrowed a million dollars to buy and renovate a great home which we will live in until we retire. We plan to sell it and then take the capital gain, tax free – we hope there will be no change of tax laws –  and we also plan to buy a little home in the country near to a beach to live in after working.

However, these rate rises are very hard to cope with and we are thinking about fixing but we are often told that people who fix loans often lose out. What is your advice?

Yes, fixers often lose out because rates suddenly drop and while this could happen, economists don’t see it over the next three years. However, they can be wrong and financial markets are still very vulnerable to post-GFC shocks so it will be a gamble.

My view is that if you’re paying seven per cent now and you would find eight per cent or higher difficult to pay, you should have a serious think about fixing. You do have to know what the break fee is if you try to back out of the loan and remember that if rates fall you will be stuck on your fixed rate.

You also have to know that you can’t pay off your loan quickly without a fee, if you sell your home or get a windfall, say from an inheritance. If the world economy progresses as economists think, then eight per cent home loans within one and a half years is very believable. This could be a measuring stick to use to work out your tricky problem.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Related articles

Borrowing to buy a property? How much should you borrow?

And are reverse mortgages a good alternative?

Published on: Tuesday, November 09, 2010

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300