{"id":8116,"date":"2016-05-31T10:00:03","date_gmt":"2016-05-31T00:00:03","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=8116"},"modified":"2016-05-31T10:00:03","modified_gmt":"2016-05-31T00:00:03","slug":"is-now-a-good-time-to-lock-in","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/is-now-a-good-time-to-lock-in\/","title":{"rendered":"Is now a good time to lock in?"},"content":{"rendered":"

Andrew Mirams<\/strong> from Intuitive Finance answers the often asked question – <\/b>to lock in or not?
\nTranscript:<\/strong>
\nKevin:<\/b>\u00a0 This question comes in from many, many, people \u2013 no one specifically, but we are regularly asked this question and more so right now with the movement in rates. The question is \u201cIs this a time to fix my interest rate?\u201d Well, let\u2019s find out. Joining me to discuss this is Andrew Mirams from Intuitive Finance.
\nAndrew, no doubt, you\u2019re asked the same question.
\nAndrew:<\/b>\u00a0 Absolutely, Kevin. Very, very, very topical at the minute with rates high on the agenda and rates reducing lately, and now there\u2019s a real frenzy towards fixed rates. And the frenzy is largely being led by the lenders coming out with some really great fixed-rate options.
\nKevin:<\/b>\u00a0 They\u2019re all out touting for the business. How do we make that decision when it is time?
\nAndrew:<\/b>\u00a0 There is a whole range of things. Rather than just focusing on the rate, there\u2019s a whole range of things that you probably need to attend careful consideration that I think you need to just take into account before you go and rush in and just grab a rate. I think there are a number of things.
\nThe first one with that is really deciding on the fixed rate term. Lenders are trying to lock you in for certain times because that\u2019s where they are able to access cheap money. But does that actually suit what you are trying to achieve either from your home, your investments, or whatever it is. So actually deciding on the terms is a really important one.
\nThe next couple that you need to be aware of is the majority of lenders won\u2019t have an offset account with a fixed-rate mortgage. They very seldom allow you to make additional repayments. Most of them will allow you a small increment each year \u2013 maybe $5000 to $10,000 \u2013 but if you\u2019re really looking to fast track repayment on your loan, you generally can\u2019t do that with a fixed rate. You can\u2019t have a redraw. Just like most lenders won\u2019t have an offset account, you can\u2019t redraw your additional payments, as well.
\nThe fixed rates really do just give you a guaranteed rate. They reduce your flexibility and your options a hell of a lot more, as well.
\nKevin:<\/b>\u00a0 What about additional payments? Is that an important consideration, as well?
\nAndrew:<\/b>\u00a0 I think for a homebuyer or someone trying to reduce their home loan or something like that, absolutely it can be. Everyone is different, Kevin. Some people can\u2019t have cash sitting in their account; the temptation is too much. So actually reducing their loan and seeing it come off the loan is an easier way for them to be disciplined around their loan repayment.
\nKevin:<\/b>\u00a0 Will all lenders allow you to split your loan \u2013 in other words, do part fixed and part variable?
\nAndrew:<\/b>\u00a0 Yes, and that\u2019s a really good strategy we are finding at the moment with rates so low \u2013 being able to grab some rate security with a fixed rate but keeping a flexibility available with an offset, with additional repayments, with redraw, and things like that. I think, depending on the size of the portfolio, that\u2019s probably the best strategy to be looking at and considering right as we speak.
\nKevin:<\/b>\u00a0 Is there a better percentage to do it?
\nAndrew:<\/b>\u00a0 The majority of people say, \u201cI just want to fix half.\u201d If you\u2019re really fixing because you\u2019re worried about your rate security and rates potentially going up \u2013 which I don\u2019t think will happen any time soon \u2013 you might put more into the fixed and keep more flexibility. If you had the opportunity to be paying more off over the short term, you might put more in the variable rate and less in the fixed rate. So it\u2019s really just getting the balance right.
\nKevin:<\/b>\u00a0 I suppose a couple of other considerations would be if we want to sell during the fixed-rate period and also if I\u2019d like to refinance.
\nAndrew:<\/b>\u00a0 Absolutely. Once you\u2019ve agreed with that rate and it\u2019s for a two-, three-, four- or five-year term \u2013 whatever you\u2019ve agreed to \u2013 that means that you\u2019ve actually locked those funds in. So if you want to refinance within that term or you sell the property within that term, you can be up for some \u2013 at times \u2013 quite hefty repayment penalties.
\nKevin:<\/b>\u00a0 We\u2019re all a bunch of gamblers, mate. What about that feeling of \u201cWow, maybe rates will go lower\u201d? Should that be a consideration?
\nAndrew:<\/b>\u00a0 No, it shouldn\u2019t be. It\u2019s like taking an insurance policy. When you take an insurance policy on your home, you\u2019re hoping it doesn\u2019t burn down so that you can claim on it. A fixed rate is a bit the same; you\u2019re fixing it in for that period because you want that certainty and you think it\u2019s a good rate. Don\u2019t focus on what the rates might do because there is generally a longer term rationale and philosophy around the fixed rate.
\nKevin:<\/b>\u00a0 I said at the outset that we get this question quite often. I do recall someone who wrote in and asked about this question and was wondering whether or not they could access extra equity if the property increased in value during the fixed-rate term.
\nAndrew:<\/b>\u00a0 That\u2019s a great question. The short answer is yes, you can, but it has to be with that lender that you\u2019ve fixed at. So you can\u2019t take it to another lender unless you\u2019re willing to pay the repayment costs. It\u2019s not added on to that current loan. It would be set up as a separate loan or line of credit or whatever facility you wanted to take.
\nThe short answer is yes, but then you\u2019re subject only to that lender\u2019s terms and conditions at the current day.
\nKevin:<\/b>\u00a0 What about job security? I guess everyone should have a buffer anyway, but you should have a buffer if you\u2019re not quite sure about how secure your job is.
\nAndrew:<\/b>\u00a0 Absolutely. If you\u2019re thinking that you\u2019re looking to change jobs, your position might change for better or worse, and that might give you the opportunity to make more payments or you\u2019re going to struggle with the loans, then I would suggest fixing at that time is not the best option unless you\u2019re guaranteed to have some ongoing income.
\nYou\u2019re right; you have to have your buffer there, but you want to make sure that you\u2019re not fixing yourself in to give yourself less flexibility. All of the splitting and fixing and having a variable rate, you should always be looking at the maximum flexibility as well as then grabbing some rate security.
\nKevin:<\/b>\u00a0 That\u2019s a great insight, Andrew. Thank you so much for that. Just wrap it up for me, now give me a conclusion to this \u2013 your summing up.
\nAndrew:<\/b>\u00a0 I think before you rush out and fix rates or do anything, that you\u2019re just grabbing an actual rate, just make sure there is a little bit more strategy around what your actual end goal is. Don\u2019t grab a five-year rate when you might be going to sell the property in two years. You need to just put a little bit of thought process in before you actually lock in, because once you\u2019re locked there is no unwinding it without some cost to yourself.
\nKevin:<\/b>\u00a0 Great advice from Andrew Mirams at Intuitive Finance. Don\u2019t forget you can discuss your specific needs and formulate the right strategy for your needs by getting in touch with the team at Intuitive Finance. Organize your complimentary 60-minute session today. Click on the link on the home page at RealEstateTalk.com.au.
\nAndrew, thanks for your time.
\nAndrew:<\/b>\u00a0 My pleasure, Kevin. Thank you.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

Andrew Mirams from Intuitive Finance answers the often asked question – to lock in or not? Transcript: Kevin:\u00a0 This question comes in from many, many, people \u2013 no one specifically, but we are regularly asked this question and more so right now with the movement…<\/p>\n","protected":false},"author":176692471,"featured_media":8117,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,36],"tags":[101],"class_list":["post-8116","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-property-investment-topic","tag-podcast"],"yoast_head":"\nIs now a good time to lock in? - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/is-now-a-good-time-to-lock-in\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is now a good time to lock in? - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Andrew Mirams from Intuitive Finance answers the often asked question – to lock in or not? 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