If you can get an interest-only loan, it will likely carry a higher interest rate.
Many investors looking for repayment security and a predictable tax position prefer fixed interest rates. Here, over a year, Big Bank leads the charge on interest rates, with 1.89 percent. Then comes Defense Bank and RACQ Bank, both with 1.99%, and Police credit union with 2.09 percent.
Over three years, the best players are a little different.
The highest three-year fixed rate comes from MOVE Bank, at 1.99 percent. Australian Mutual Bank offer 2.23%, Easy street has 2.29 percent, and Bankwest and Home loans good tied for fourth place at 2.34 percent.
What you will notice about almost all of the fixed rates in the attached tables is that the comparison interest rate – the rate at which the loan is in default after the fixed rate period – can be considerably higher. raised. Part of the reason is that the lender may be using the fixed rate to lure you into their mortgage product.
The comparison rate calculates the actual cost of a loan – including all interest and fees – over a 25-year period. However, it is based on a loan of $ 150,000, which is so low that it puts a disproportionate emphasis on the fees.
If you think about it, after a three-year fixed rate, there are still 22 years of variable rates captured in the comparison rate calculation, so most of the comparison rate for fixed loans is determined by the rate used on the day. where the mortgage becomes a variable rate loan again.
Peter Marshall, head of research at Mozo, says savvy investors don’t just need to adjust to the higher floating rate at the end of the fixed rate period.
“In many cases, lenders will work with you at the end of the fixed period to transfer the loan to a more suitable rate – the comparison rate is just the ‘if you don’t do anything to change it’ rate,” he says. . It is therefore essential that you know when your fixed rate period ends, to ensure that you do not find yourself dragged into an uncompetitive variable interest rate.
With fixed rates on mortgage loans for homeowners and investors on the rise, there is little time to wait for anyone looking to commit.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions regarding investment or financial products. They should always seek their own professional advice that takes their personal circumstances into account before making any financial decisions.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.