Question about Mortgage Repayments

My wife and I purchased a property in June 2014 for $730,000 (inc stamp duty)

We had $230,000 as a deposit and took out a $500,000 loan

We split the loan into fixed ($300,000 for 3 years at 5.5%) and variable/offset ($200,000)

We are hoping to pay off the variable loan by the end of this year ($35,000 is left to pay off)

Once the $200,000 has been paid in December hypothetically, this'll leave us say about 6 months till the fixed loan 3 years ends.

In this 6 months we can only pay off the maximum monthly allowance for the fixed loan. are we able to and is it worth talking to the bank to see if we can change the fixed loan to variable? What are our options?

Hope this made sense, I'm not too good with all this stuff lol

Cheers

Comments

  •  

    Personally I dont think that the bank will be happy to change your fixed (higher interest rate) to variable, also the loan amount is not high.

    the best to do is refinance? which you can switch to another bank

  • +5 votes

    The bank will likely charge you a break fee for switching back to variable. You might have some luck talking to a mortgage broker to see what they recommend.

  •  

    As above. There are also some break fee calculators online that will give you a ballpark. Generally if the interest rate gap is >1%, its about $3-5K per $100K owing.

  • +1 vote

    Check with the bank, you may be able to pay a one-time lump sum off the fixed component, often it's allowed once per year and up to a maximum. As an example, I think ANZ used to let me pay $10,000 of my fixed component once per year. Break fees can be expensive, get them to give you a quote before trying to change banks.

    •  

      A once off $10k in addition to monthly repayments?

      • +1 vote

        Yes

  •  

    Check your bank if they can set up 100% offset account on the fixed term mortgage.

  •  

    less than 2 years and paid off $165k, you are doing well. : )

    •  

      165K + Payments for the fixed loan as well?

  •  

    keep paying the fixed. roll over to buy another property is an option to consider.

  •  

    You will get charged a fee for breaking the fixed loan. If you open an interest offset account, you will most likely get charged a fee for restructuring your loan. With only 6 months left, I would pay the extra amounts they will let you pay per annum into the fixed loan (normally max is additional $10k pa after minimum repayments), save the extra amounts you want to add into a savings account, then transfer it into the loan in 6mths time.
    However, as all banks are different, you are really better off if you give your bank a call and ask them.