Fact Checked
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.99% p.a. | 7.01% p.a. | $3,323 | Principal & Interest | Variable | $null | $230 | 70% |
| Promoted | Disclosure | ||||||||||
7.19% p.a. | 7.74% p.a. | $3,391 | Principal & Interest | Variable | $395 | $null | 60% |
| ||||||||||||
7.24% p.a. | 7.26% p.a. | $3,407 | Principal & Interest | Variable | $0 | $220 | 70% | Disclosure | ||||||||||||
7.25% p.a. | 7.65% p.a. | $3,411 | Principal & Interest | Variable | $30 | $825 | 80% | |||||||||||||
7.74% p.a. | 7.76% p.a. | $3,579 | Principal & Interest | Variable | $0 | $221 | 80% | Disclosure | ||||||||||||
7.75% p.a. | 7.83% p.a. | $3,582 | Principal & Interest | Variable | $0 | $995 | 80% | |||||||||||||
7.49% p.a. | 7.51% p.a. | $3,493 | Principal & Interest | Variable | $0 | $230 | 80% |
| Promoted | Disclosure |
Important Information and Comparison Rate Warning
Important Information and Comparison Rate Warning
Buying property through self-managed superannuation is an increasingly popular investment strategy in Australia. That normally involves an SMSF loan - which means choosing between fixed and variable rates.
What is a fixed-rate SMSF loan?
A fixed-rate SMSF loan has an interest rate that doesn't change over the fixed term. While variable rates are subject to fluctuation (such as when the RBA adjusts the cash rate), fixing guarantees your repayments will remain stable for a set period of time. This could help you avoid interest rate rises and potentially save on interest costs, although that depends on how good the fixed rate is relative to variable rates on the market.
Why choose a fixed SMSF loan?
Depending on how variable interest rates change during your fixed period, you might end up better or worse off. However, there are a couple of advantages beyond the financial aspect to fixing an SMSF loan.
Help comply with investment strategy
Fixing the rate on your SMSF loan can lower the risk of the fund needing to amend its investment strategy. All SMSF trustees need to have a written investment strategy that the fund needs to comply with. The investment strategy needs to consider the composition of the fund's assets, its liquidity and its ability to pay retirement benefits to members.
If there was an unexpected interest rate increase and an SMSF had loans on variable rates, the fund might need to change its investment strategy in order to allocate more money to loan repayments. Fixed rates help prevent this from happening.
Improved forward planning
Fixing rates often makes forward planning easier since there's no chance of an unexpected increase in loan repayments. This stability means SMSF trustees can allocate funds for expenses like insurance, property maintenance or retirement benefit payments with greater certainty that money won't need to be diverted to loan repayments.
Why choose a variable-rate SMSF loan?
Alternatively there are also some pretty compelling reasons for an SMSF fund to go with variable loan rates.
Flexibility
Arguably the biggest benefit to variable rates is the extra flexibility. Variable rates can make it easier to refinance or sell the property, since the exit costs are generally a lot less than on fixed terms, which come with break costs. This means it can be easier for your SMSF to respond to changing market conditions.
Extra features
Variable-rate loans are also usually more likely to include things like extra repayments or an offset account. These features can help reduce interest costs if properly utilised, and are worth considering before locking in to a fixed-rate.
Should you choose a fixed- or variable-rate SMSF loan?
Whether fixed or variable rates are right for your SMSF loan depends on your fund's investment strategy as well as the economic outlook. If your investment strategy specifies a low risk approach, you might decide fixed rates are more suitable to eliminate the risk of seeing repayments shoot up. At the same time, variable rates can go down instead of up so there's still the risk of missed opportunity from fixing.
When the cash rate is generally expected to go up in the near future, fixed rates tend to be higher than variable rates. If rates are expected to go down, fixed rates tend to be lower than variable rates to attract borrowers.
The choice might also depend on the long term plans for the fund. Say some fund members are approaching retirement age and are set to receive a lump sum payment. The trustee might decide fixed rates and stable repayments are more suitable to ensure the fund will be able to meet these obligations.
Frequently Asked Questions
Most fixed-rate loans have a revert rate the loan will automatically switch to once the fixed term is up. This is often just the lender's standard variable rate at the time. However, there are some lenders that instead have a rolling fixed term - unless specified otherwise the loan will automatically fix again for the same term, but at new rates.
You can break a fixed SMSF loan, but there are often substantially higher break costs compared to exiting a variable rate loan. Depending on how much time is remaining on the fixed term, these costs may be thousands of dollars, which is something to keep in mind if you’re considering a fixed rate.
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