Refinancing - 1year, 2 year or float?

[SwissTony]

HI guys,
I am refinancing my mortgage this week and need to decide on the structure.

My mortgage broker is recommending a 2-year fix. But my concern is that, when the 2 years is up, rates will almost certainly be quite a bit higher.

I am tempted, instead, to go for a 1 year fix in the hope that, once the year is up rates will not have moved too much. Then, I could fix at that point for 2 or 3 years. And the other advantage with this is that 1-year rates are lower than 2-year rates

Or.. i could go float?

Just wondering what people think

Cheers!

[Hound]

I'm refixing two mortgages for one year this week. It also happens to be the best rate.

[SwissTony]

I'm refixing two mortgages for one year this week. It also happens to be the best rate.

Hi there Hound - what made you choose 1-year over floating?

[Scott Miller]

How big is your mortgage?

[Hound]

For me one year is a much better rate. There are many other variables to consider when making these decisions, you gotta add them up & go with what you believe. Pretty much the same as what the banks do when they set interest rates. They all compete in the same market, so they do react to each others advertised rates. Personally I don't think the interest rate situation will be a lot different in a years time.

[Orkibi]

Tony, how Big is the loan???? Is it one loan or few?

if its over say 250k I would split it... But can't comment without knowing the size of the borrowing.

[Rosco]

Why are you only looking at the short term rates?

I like to split between short term (floating or 1 year), medium term (2-3 years) and long term (4 or 5 years).

To me, 5 year rate is about stablility. It might not be the best rate, but I'm very happy in the knowledge that on a portion of my loans I will be paying around 6% for the next 5 years.

With interest rates, I generally find that you never get the best deal. There is always something better that comes along later, or earlier (that you turn down).

In your case if you do just want to choose between floating, 1 year and 2 years
- why not spread between 1 and 2 years? half each?
- I generally don't like floating at the moment, because it is a lot more then 1 year. Yes it gives you slightly more flexibility, but generally if you float now, you will still be floating in one years time anyway.

Ross

[SwissTony]

Tony, how Big is the loan???? Is it one loan or few?

if its over say 250k I would split it... But can't comment without knowing the size of the borrowing.

Hi Orkibi, its approx $180k

[Orkibi]

Well, it depend on few things like are you planing to pay down debt?

if you do get lump sum from time to time and can use it to pay down debt I would go:50k floating, 65k for 2 years and 65k 3 years.

[Craig Pope Mortgages]

If you are wanting to take a punt that rates are going to stay low for a bit longer, maybe 6 months is a better option and review then. It's 'crystal ball' stuff really and having a split loan with long and short rates is not a bad option either.

[Maccachic]

I negotiated my floating rates down to 4.95 with National before it changed over to ANZ. Also have a dicount on my total money floating with BNZ.

[Ivan McIntosh]

I like the 3 year rates at the moment of around 5%. I don't think 1 year is long enough....my crystal ball gazing suggests we will be on an upward trend by then, and fixed rates will be significantly higher. All personal opinion, of course.