The pros and cons of locking in your loan into a fixed rate

The question is, should you to lock in your loans into fixed rates or not? Interest rates are currently low and property investors are still being offered attractive fixed loan rates in spite of APRA’s intervention. Notably, accountants in Brisbane believe that interest rates won’t be increasing soon and will likely be steady for several months because of the market.

One advantage of locking your loan into a fixed rate is knowing your financial commitments for a fixed period of time. However, there are disadvantages too so you should consider these things first before you decide to fix your loans.

Remember that if you sell your property during the fixed loan term, you may get a penalty for breaking the agreement. If you want to use the equity of your property during the fixed term, you may incur costs that can prohibit you from doing so.

You may also not be allowed to use an offset or savings account with a balance that can offset against the loan for the purpose of reducing the interest of the loan. Extra repayments may be restricted as well so you may want to leave some of your mortgage variable to maximise your offset account. Consult with accountants in Brisbane to know how you can do this.

You may split the facility with one part being fixed and another being variable for flexibility. Based from experience, beginner investors often lock in 50% of the loan while experienced ones fix a larger percentage of their loan. If you think interest rates won’t rise in one to two years, you may fix your loan for a short period but if after that the rates will likely remain high, that’s the time you would need to talk to your accountant. Chan & Naylor has experienced accountants in Brisbane who can give you expert advice.

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