Tuesday, 11 November 2008

Fixing our interest rate - a retrospective

Back in February this year, we fixed our home loan interest rate for the the next four years. Now that we are coming up to the one year anniversary, and falling interest rate. It is interesting to find out if we have made the correct decision.

One of the things that fixed interest rate gave us was a peace of mind. Like the many mums and dads out there, I don't really have a clue on which way the interest rate is going. At the time when we fixed the interest rate, it was on the way up. Looking back on it, it pretty much hit the top and is starting to plateau. However, we missed about two interest rate increases. Furthermore, the fixed interest rate gave my wife and I a peace of mind and some certainty on what our monthly mortgage payment is going to.

Now that interest rates are on their way down, we are considering re-negotiating a new loan. However, among the fees that the new loan will incur is an re-establishment fee, which will be about $600 to $700 and mortgage insurance if the new loan amount is more than 80% of the loan (a few thousand dollars). A calculation will need to be made to determine how much will be save and the saving will begin when the fees are taken into account.

During the reconsideration of the new loan, we are not going to limit ourself to our current bank. Perhaps we should consult a mortgage broker to see if they can secure a loan with a low cost.

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Interest rate fixed