Go Back  British Expats > Living & Moving Abroad > Australia
Reload this Page >

Home loan - fixed or variable?

Home loan - fixed or variable?

Old Oct 5th 2010, 12:15 am
  #16  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by spottydog
All the variables depend on your circumstances. It would probably be a good idea for you to see a good independent mortgage adviser (they generally don't cost anything as they get referral fees from the mortgage provider).
That sounds like a conflict of interest to me. Independent and commissioned?
Steve2009 is offline  
Old Oct 5th 2010, 12:17 am
  #17  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by DeadVim
Top tip ... pay fortnightly, not monthly, the savings are huge.
Only if you are paid fortnightly also?
Steve2009 is offline  
Old Oct 5th 2010, 1:20 am
  #18  
Account Open
 
Joined: Jan 2005
Location: Brisbane
Posts: 4,298
asprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond repute
Default Re: Home loan - fixed or variable?

If I take out a fixed loan, I am reducing my risk, but I pay a premium for that privilege. Whereas, if I take out a riskier variable loan, I can pay less.

So - if I need certainty over my loan repayments, and no risk, I will take out a fixed product.

Personally I do not need certainty over my repayments, so a fixed product is a waste of money for me. However, circumstances vary, from person to person.


Of course, if you are a gambling man (or woman) you might like to think that you can predict the direction of homeloan rates, and the trend. E.g. lets say that a variable rate = 5%, and a fixed rate for 3 years = 5.4%. If you believe that over the course of the next 3 years you will be paying > 5.4% on average over that period on a variable loan (perhaps you think that homeloan rates will rise) then you might select a fixed product.

But it is worth bearing in mind that a person's ability to take that kind of punt, has been severely hit by the GFC.

In any case, even if you "gamble" on the fixed rates and you win, the savings you make versus variable repayments (on a regular sized homeloan) will be pretty small.
asprilla is offline  
Old Oct 5th 2010, 1:30 am
  #19  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by Swerv-o
In the end, I went for a variable mortgage with a transaction offset account - I get my pay paid into the offset, so it immediately starts working for me by offsetting some of the interest. I live on my credit card for the month, then pay the whole balance at the end of the month, essentially using the bank's interest free period on CC purchases instead of my own money. Because my pay has gone into the account, any left over at the end of the month is automatically used to offset the interest, but is still always there if I need to access funds in a hurry with no re-draw fees. The savings on interest are huge - usually of the order of $2500 a quarter, which really mounts up over the term of a mortgage.
Interesting idea. Could save you a lot as long as you remain a 'deadbeat' (credit card industry term, derogatory from their perspective, complimentary from the cardholders!). You can use the same idea to profit with a demand deposit account as long as you're disciplined.
Steve2009 is offline  
Old Oct 5th 2010, 1:35 am
  #20  
Account Open
 
Joined: Jan 2005
Location: Brisbane
Posts: 4,298
asprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond repute
Default Re: Home loan - fixed or variable?

Originally Posted by DeadVim
We have both, 60% fixed, 40% variable ... the variable can be paid off at any time and we can make extra payments with no penalty.
This is a good compromise between the two... you're hedging your bets. You know that over the long term, you are paying a little extra for the privilege of the fixed rate. But it is a good privilege, because you are not so exposed to big changes in variable rates. I reckon there are quite a few people out there who would be suffering significantly with a 3 or 4% rate rise.... but not someone who has fixed their entire loan, or a portion of it.


When the fixed period is over - it is time to review personal circumstances and see what is best going forwards.... Lets say I have 50% of my loan fixed for 5 yrs and 50% variable. Over that 5 years I'd be paying down the variable portion as much as possible. I'd be hoping that my salary would increase, at least in nominal terms....and I'd be hoping that homeloan rates did not go up significantly. So when the 5yrs is up, I might be in a position to go 100% variable.

ps - Deadvim I'm sure you know all that stuff already.... my comments were really just meant for scubaemma's info !!!
asprilla is offline  
Old Oct 5th 2010, 2:41 am
  #21  
Account Open
 
Joined: Jan 2005
Location: Brisbane
Posts: 4,298
asprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond reputeasprilla has a reputation beyond repute
Default Re: Home loan - fixed or variable?

Originally Posted by Swerv-o

In the end, I went for a variable mortgage with a transaction offset account - I get my pay paid into the offset, so it immediately starts working for me by offsetting some of the interest. I live on my credit card for the month, then pay the whole balance at the end of the month, essentially using the bank's interest free period on CC purchases instead of my own money. Because my pay has gone into the account, any left over at the end of the month is automatically used to offset the interest, but is still always there if I need to access funds in a hurry with no re-draw fees. The savings on interest are huge - usually of the order of $2500 a quarter, which really mounts up over the term of a mortgage.


S
I thought that everyone did it this way? heh heh. Of course, the reality is, not many do.

A slightly different option, is to just use a standard variable account, with no frills.... no fees, no interest rates, and no fees on redraws.

When you get paid - just transfer the balance into your standard variable account. The end result is the same. But the difference is, you don't have to pay the premium for the offset facility. I haven't looked at loans for a while so I don't know how big (or small) that premium is right now. Obviously, it varies between lenders.

One thing to note though, is that the offset facility does have its advantages in the world of tax deductions on property. More details are on the somersoft forums. Obviously this last point is only applicable to investment properties.
asprilla is offline  
Old Oct 5th 2010, 2:44 am
  #22  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by asprilla
I thought that everyone did it this way? heh heh. Of course, the reality is, not many do.
If they did then Mastercard and Visa would be broke. The house always wins.
Steve2009 is offline  
Old Oct 5th 2010, 2:52 am
  #23  
Mostly Harmless
 
DeadVim's Avatar
 
Joined: Jan 2010
Location: Semi-rural wonderworld, Brisbane
Posts: 15,109
DeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond repute
Default Re: Home loan - fixed or variable?

Originally Posted by Steve2009
Only if you are paid fortnightly also?
Not in our case, the payment frequency on our loan is independent of when we are paid. We have weekly debits set-up to sub-accounts (internet banking, so no fees).

One debit syphons off the total repayments for both loans as soon as we are paid and another debit pays off the 2 loans as the repayments are due. This is made easier by having the loans and banking with the same institution, I suspect (it's all internet driven).

This means we never see the repayment amount in the 'living' account, I prefer this as we are not tempted to spend it.

Before my current 'career break' I was paid weekly and my OH was paid fortnightly ... now we have just rejigged the debits so everything stays in sync.

If it was a monthly salary then only the initial syphon amount would change, the loan repayments would still be fortnightly.
DeadVim is offline  
Old Oct 5th 2010, 2:53 am
  #24  
Mostly Harmless
 
DeadVim's Avatar
 
Joined: Jan 2010
Location: Semi-rural wonderworld, Brisbane
Posts: 15,109
DeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond repute
Default Re: Home loan - fixed or variable?

Originally Posted by asprilla
<snip>ps - Deadvim I'm sure you know all that stuff already.... my comments were really just meant for scubaemma's info !!!
Hey, I can always learn too ... I came into the country with $60k of credit card debt
DeadVim is offline  
Old Oct 5th 2010, 2:56 am
  #25  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by DeadVim
One debit syphons off the total repayments for both loans as soon as we are paid and another debit pays off the 2 loans as the repayments are due. This is made easier by having the loans and banking with the same institution, I suspect (it's all internet driven).
Wouldn't you be better off paying monthly as you receive the credit and not leaving the funds for the second debit languishing in your account costing you money?
Steve2009 is offline  
Old Oct 5th 2010, 3:51 am
  #26  
Mostly Harmless
 
DeadVim's Avatar
 
Joined: Jan 2010
Location: Semi-rural wonderworld, Brisbane
Posts: 15,109
DeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond repute
Default Re: Home loan - fixed or variable?

Originally Posted by Steve2009
Wouldn't you be better off paying monthly as you receive the credit and not leaving the funds for the second debit languishing in your account costing you money?
I am prepared to be corrected but my belief was that if you compare fortnightly to monthly repayments in a loan calculator then the savings to be had would be far more than you could earn in interest in an average savings account, or indeed, in a higher interest sub-account.

Plus, by paying fortnightly you effectively make one extra repayment a year.

I'm on holiday so I'm buggered if I'm doing the maths
DeadVim is offline  
Old Oct 5th 2010, 3:54 am
  #27  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by DeadVim
I am prepared to be corrected but my belief was that if you compare fortnightly to monthly repayments in a loan calculator then the savings to be had would be far more than you could earn in interest in an average savings account, or indeed, in a higher interest sub-account.

Plus, by paying fortnightly you effectively make one extra repayment a year.

I'm on holiday so I'm buggered if I'm doing the maths
Only if you're paid fortnightly, as the cash would be going onto the loan as soon as you get it. By holding onto the second installment for a fortnight you are paying for that cash for an extra fortnight. If you are keeping it in a zero interest current account your paying the full rate of your mortgage interest for it. If you're keeping it in a high interest account then the cost is offset by interest earned, less tax.
Steve2009 is offline  
Old Oct 5th 2010, 4:05 am
  #28  
Mostly Harmless
 
DeadVim's Avatar
 
Joined: Jan 2010
Location: Semi-rural wonderworld, Brisbane
Posts: 15,109
DeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond reputeDeadVim has a reputation beyond repute
Default Re: Home loan - fixed or variable?

Originally Posted by Steve2009
Only if you're paid fortnightly, as the cash would be going onto the loan as soon as you get it. By holding onto the second installment for a fortnight you are paying for that cash for an extra fortnight. If you are keeping it in a zero interest current account your paying the full rate of your mortgage interest for it. If you're keeping it in a high interest account then the cost is offset by interest earned, less tax.
Hmmmm, yes, that is true, it is always best to pay as much off the loan as quickly as possible (pay off the highest interest debt you have and all that) ... but ... if you pay monthly you make 12 repayments a year, if you pay fortnightly you make 13, which soon makes a difference.

So, as far as I can see, even if you are paid monthly then you should set the repayment period to fortnightly if you can afford to make the extra repayment.

I think ...
DeadVim is offline  
Old Oct 5th 2010, 4:12 am
  #29  
BE Forum Addict
 
Joined: Mar 2009
Posts: 1,412
Steve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to beholdSteve2009 is a splendid one to behold
Default Re: Home loan - fixed or variable?

Originally Posted by DeadVim
So, as far as I can see, even if you are paid monthly then you should set the repayment period to fortnightly if you can afford to make the extra repayment.
I think you'll find the discrepancy is that your employer enjoys the benefit of your cash-flow for an extra two weeks if you are paid monthly versus fortnightly. Fortnightly pays are hence more valuable than monthly pays for the same annual salary.
Steve2009 is offline  
Old Oct 5th 2010, 4:16 am
  #30  
...giving optimism a go?!
 
DadAgain's Avatar
 
Joined: Jun 2007
Location: Brisbane (leafy, hilly western suburbs)
Posts: 2,202
DadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud ofDadAgain has much to be proud of
Default Re: Home loan - fixed or variable?

Originally Posted by DeadVim
.. if you are paid monthly then you should set the repayment period to fortnightly if you can afford to make the extra repayment.
Indeed - the only real problem might come in the 1 month of the year where you get 2 mortgage payments coming out of the same monthly pay packet...

Perhaps a better way would be to have your pay credited directly to the mortgage account and have a monthly redraw from that account to cover the full amount of the credit card bill... (and REFUSE point blank to deal with any business or person that wont take credit cards! - we *NEED* those QFF points )
DadAgain is offline  

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service -

Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.