Hello all, just thought I'd run this Hypothetical Situation and get some thoughts and ideas.
Mr Smith has a 180K housing loan which is due to come out of a fixed interest loan (which was 7.69% for 3 years) around April. He has around 20K in savings.
Mr Smith is considering his options for when his loan comes out of the fixed rate. He is undecided whether to re fix for another say 3 years, perhaps fix 50% and leave the other 50% @ a variable rate or leave the full amount at a variable rate.
Current Variable rates ~ 5.95% and 3 year Fixed rate anywhere from 6.5% to 7.5%. This is without any further interest rate rises between now and then.
Mr Smith has a female friend of a few years, Miss Brown who has ~ 50K in savings. The pair have been looking around for a 1st Home for Miss Brown, which after the initial 6-12 months would be rented out as an Investment Property.
They are looking for properties which they would be able to Positive Gear (80% LVR) or at least get close to. These houses are around in their area, however nothing as of yet has met the criteria.
The above situation would be ideal, however together they have been thinking that with more possible interest rates in the future, it may be more practical if a suitable house isn't found by the end of April to pay 40-50K off Mr Smith's mortgage and really hook into paying it off within ~ 5 years.
Why not pay 50K off Mr Browns mortgage and then if the right house comes along re-finance? Could always be done, but they then doubt Miss Browns eligibility for the First Home Buyers Grant (7K for the house and No Stamp Duty) as they couldn't really go shuffling that amount of money back and forwards without raising suspicion.
Be interested to hear thoughts/ideas and opinions. If there are more questions that need to be asked, go ahead, I have the book with this story in it close by to me at most times.