Fixed or variable? Sell or invest? The team at Bernie Lewis Home Loans make sense of the mortgage minefield.
Interest rates are currently low despite the booming property market, so is now the time to invest or sell?
Interest rates are at never-before-seen historic lows and the property market in Adelaide and many regional areas is booming. If you are considering selling your property, then now may be a great time to take advantage of potential capital gains. For investors, there is a clear shortage of rental properties available, with rental vacancy rates in most areas outside the CBD at one percent or less.
Do these low rates also mean it’s a good time to fix your rates?
Fixed interest rates are very competitive at present with some lenders offering rates well under two percent. The decision to fix your loan is one that should be considered carefully before committing. A fixed loan generally has restrictions on additional repayments and may have less features available than a variable rate loan. Additionally, if you sell your home or need to refinance before the fixed term has ended, you may incur penalty break costs which can be considerable. A split loan, where part of the loan is fixed and part is variable, is worth considering so as to retain the ability to make additional repayments, access redraw or use an offset facility.
Refinancing is often put off by homeowners because it’s a lengthy process to find the right lender with the best rates. What should people consider when choosing a new lender?
We strongly recommend you review your loan every two years, or if there is a change in your circumstances. During a loan review we will compare your current loan with what is available in the market. We not only compare your current interest rate, but also other features and benefits that may suit your needs and lifestyle. It is surprising how many people are unaware they have a loan with an interest rate that starts with a three or even a four. They could have a loan with an interest rate that starts with a two or even a one, potentially saving themselves thousands of dollars in interest per year. Our Brokers can compare your current loan with what is available from our panel of more than 30 lenders to see how much you could potentially save. There is no fee for our service as we are remunerated by the lender.
Online lenders often offer lower rates – why?
Over the last few years, a few online lenders have emerged in the marketplace. Some of them have rates that are lower than other lenders, but their products often come with less features. Online lenders also require you to complete the application process yourself and do the running around to gather all of the required supporting information to get the loan assessed and approved.
Is it worthwhile asking my current lender to match the interest rates of other lenders?
Most definitely. If you have had your current loan for more than a couple of years there is a good chance that your current interest rate is not very competitive. Banks are notorious for offering new customers better interest rates than what is available to their current customers. We call that a ‘loyalty tax’ – if you don’t ask then you don’t get.
Bernie Lewis Home Loans
213 Fullarton Road, Eastwood
08 8300 8300