There is a lot of talk about interest rates decreasing in 2015, but what does this really mean for you? It will give the investors and owner occupiers a bit of confidence in the short term.
But how can you cash in on these historically low rates for the longer term?
The answer is simple, you need a good plan and it is better to plan when rates are low or nearing the bottom of the current interest rate cycle. As too many people start trying to plan when finances get uncomfortable, and interest rates are higher.
The first question you need to ask yourself is how much am I able to pay off the loan per year? Be realistic with this, if you can afford another $200 per week and you are paying off $5,000 per year already, allow yourself $15,000-20,000 per year. The next step is to take the remaining debt you are unable to pay off and secure that over the mid-term. If you owe around $400,000 and you are looking at a 3 year fixed rate, you could split the loan $340,000 3 year fixed and $60,000 variable, or 5 year fixed at $300,000 and $100,000 variable.
It may sound simple enough, but what does this really do for you?
For one it gives you certainty on the majority of your borrowings, you will be able to better budget and account for your expenses over the fixed period. Secondly it gives you protection against increasing rates, you will still have a variable portion of your loan, but this is limited and hopefully rapidly diminishing over the fixed period, limiting your exposure to interest rate movement.
Even though we cannot predict the future, you can be assured that low interest rates will not be around forever, please contact us to assist you in making a plan for your future?