two questions:one about fixed or variable rates and one about overpayments

misterchuck

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Is it a better option to fix or risk things on a variable - present rate is 3.15%?
Is it better to make overpayments monthly or to put aside the overpayment in a deposit account and then pay off in a lump sum at a later date?

Thanks!


sorry about the vague original title -
 
Is it a better option to fix or risk things on a variable - present rate is 3.15%?

For me, I approach this question in what I confess is a less than academic manner. If I can afford the current rate, and think I can afford the current rate plus 2%, then I figure I'm better off taking the risk of variable rates. I make the assumption that the bank employs people with sound actuarial training who can set the fixed rate to make more money out of the risk averse than would otherwise be possible on variable rates.

Is it better to make overpayments monthly or to put aside the overpayment in a deposit account and then pay off in a lump sum at a later date?

There's plenty of posts on here about this. Basically, if you can find a really really good deposit rate, which after DIRT pays more interest than you are paying to your bank for the money, then invest, gather up the interest, and make your lump sum+interest when you feel like it. Otherwise, you might save more in the long term making overpayments.
 
It depends on a lot of things really. Like how big is the mortgage? What is your ability to pay? What proportion of net earnings is going on mortgage? How secure is your employment? Is the house in equity or negative equity? What is the difference in the interest rate you are paying and what you could achieve after dirt if invested?
I am sure there are more questions than this.
 
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