Fix, refinance or stay with current lender

[mummyoftwo]

Hello

Currently we have a variable loan (under 200,000) we are concerned about rising interest rates and thinking of fixing our loan or refinancing in hope that we can further reduce our current home loan period. Currently our variable % rate is 8.27%. The % rate to fix is 8.54% if we fix for 1,3,4 or 5 yrs, or 8.44% if we fix for 2,7 or 10 yrs. This is with our current lender, they have said we will have to revert to only paying the minimum amount required and can make additional payments to a maximum of $5000 per year. Based on what we currently repay now , we will have our loan payed off between 5-7 yrs (based on this current variable rate)

We want to pay our loan off as quickly as possible, so my question to you is, Do we:

a)fix our current loan, which we will have to revert to paying minimum repayments. Save the additional amount we pay off in a high interest account and pay this off the loan when the fixed interest period is over.

b)Find a lender who can offer us a better interest rate and refinance, keeping in mind we will be with them less than 10 yrs.

C) Don't do any of the above and stay with the current lender for the remaining 5-7yrs staying on the variable loan.

I hope your not too confused lol. Your advice would be greatly appreciated.

[andie_pandie]

Hi there Mummy of Two, oh to have a Crystal Ball at the moment. This is a very hard question as the market is just going up and up at the moment.

Remember there are peaks and troughs so it should not last forever (I hope). If you do fix then with most banks you do have restrictions on the amount that you can place into the fixed without penalty of higher interest. Each bank is different with the amounts allowed. Of course with variable you are able to put as much as you like into these loans to reduce as quickly as possible.

There are a couple of banks that you can fix the loan and still have the best of both worlds in the fact you can pay as much as you like into the fixed loan and also redraw. Hence very much like a variable but with the security of knowing what the repayment is each month.

Now you mentioned that if it is variable then you will payout within approx 7yrs, if you want me to check this please PM me as sometimes this might not be the case.

Generally if you pay fortnightly, split your monthly repayment directly in two you can save between 6-7yrs off a normal 30yr loan.

Also if you want info regarding the fixed loans with unlimited repayments let me know as well.

I hope this info helps.:)