Home Loan System

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In our Cents of Worth System, you will have seen that we noted at the start using multiple fixed rates.

Why?

  1. Having some on 1 year fixed allows you to alter your off-set amount up or down in 12 months – so if you have gone too low on the floating portion, you can move some off-fixed to floating (or pay down some of the fixed portions).
  2. Risk Management – this is mainly about rate increases
    1. Say rates are 0.5% higher in 12 months and on the way up.
    2. It means in one year, you cop part of the increase to your money system, and can adjust over the next 12 months to adjust to the next rate rise in 12 months, rather than taking on the full rate rise all at once.
    3. Be careful to not fix it for too long. There can be a temptation when long-term rates are low to do so.
      1. An exercise I always think about is how much has changed in my life in the past 5 years, if I fast forward 5 years, as much as I can plan for things, there is likely to be a similar amount of change. Does this involve my housing? I don’t plan on it, but I like to retain some flexibility.