Ready to run out and fix your home loan? Cover these key considerations first, says KnowHow founder Bushy Martin.
In a recent live ‘Bush Bite’ video on Facebook, Bushy said a key question you need to be asking yourself is ‘what are you fixing your home loan for?’.
“If you think you’re going to beat the banks in terms of costs, you’re probably going to be sadly mistaken because the banks have got teams with people way smarter than you are I looking at this,” he said.
He says another important question you need to be thinking about is whether you’re ‘looking for certainty in an uncertain world’.
“If that’s the case, if you want to be able to sleep easy knowing that nothing is going to move as far as your rates go for your home loan or investment loans, then that’s more of a decision you need to make around that, rather than trying to win on cost,” said Bushy.
Beyond these questions, Bushy also emphasises that you understand the limitations surrounding the fixing of rates.
“After the last RBA rate drop, most of the banks kept their variable rates where they are. But what they’ve done is they have dropped significantly their two or three year fixed rates,” he said.
“It’s a bit of a bait and trap technique. It’s trying to entice you to come across with a cheap rate, and then because it’s fixed, they’ve locked you in for the period at the fixed exercise because the break costs to get out of it are significant.
“So, it’s not about the rate, it’s about the costs of the loan. You need to look at the in-going, the ongoing and the outgoing costs, together with the features that come with the loans. Banks and a lot of brokers will just focus on the rate, but it’s very misleading in terms of what the true costs of that loan is.
“You may think you’re chasing a low rate. And it may save you and reduce your repayment costs in the short to medium term. But beware of other things that you’re doing around it.”
Finally, Bushy says that with any decision you make on your home loan rate, you should be acting now while you can and avoid adopting the ‘wait and see’ approach.
“What we’re seeing in the marketplace is rates and loans have never been lower, but day by day, it’s getting much harder to be able to obtain that finances. So if you are thinking that you can hang on for a while and then revisit this exercise, you may well find out that you’re too late and there’s nothing you can do.”
“Position yourself to pounce when the opportunity arises…we’re living in an artificial world where we’ve got the safety net of the government support measures sitting underneath us, and that will last until about September…so my advice, do what you can now and do it quickly while you still can.
“There are a number of banks who are actually offering pretty major cash backs to incentivise you to make the move, up to four thousand dollars on some occasions, and they’re starting to dry out. So, you want to take advantage of that to soften the blow and add some more money into your pocket in relation to reducing your costs in the short term to protect yourself long term.”
Listen to the full Bush Bite video on Facebook below. If you want more, Bushy also talked more about fixing home loans here.
KnowHow founder Bushy Martin shares regular, live ‘Bush Bite’ videos on his Facebook page sharing tips and tricks to cut costs, boost your savings and take advantage of opportunities in property. Connect with Bushy here.
KnowHow is helping Australian property owners put an extra $400 to $1200 a month back in their pockets. Want to find out how? Contact us and we’ll tell you in 15 minutes if this is for you (no catch, no BS!).