Читать книгу The Female Investor - Kate Hill - Страница 43

You need to be aware of break fees, so here goes.

A break fee represents the bank's loss if a borrower repays their loan early or switches their loan product, interest rate or repayment type during a fixed‐rate period.

When the bank agrees to lend you money at a fixed interest rate, they obtain money from the ‘money market' out there at wholesale interest rates based on you making your repayments as agreed until the end of the fixed‐rate period. If you don't, and wholesale interest rates change, then the bank may make a loss. They try and recoup this loss by charging you a break fee.

These considerations are why it's vital to consider — as best you can — all your options, as well as the likelihood of things happening for the next few years. Talk to a finance expert who can advise you on what they believe may happen with interest rates in the next couple of years. No one has a crystal ball, but a professional with their finger on the financial pulse should have an idea of where interest rates are headed in the near future.

On the whole, interest rates generally don't move up or down rapidly unless there is something serious happening, like a global health pandemic or a global financial crisis!

During both of these events, interest rates were lowered rapidly to underpin, and stimulate, the economy during the resultant turbulent economic times, but that is far from normal.

It's important to keep in mind that these scenarios are extremely rare, so please don't lose sleep over what interest rates may, or may not, do in the future. Rather, do your best to secure the optimal loan for your individual circumstances as well as your current and future property investment plans.

Of course, mortgages do need to be repaid at some point, whether it's through your own mortgage repayments, rental income, or selling the property. Most property owners opt for a principal and interest mortgage over 25 or 30 years, which means they are making regular repayments that will eventually pay off the debt.

On the other hand, investors tend to use interest‐only repayments, because only the interest is a tax deduction, but also to reduce the additional cash‐flow demands from their own bank accounts (we talk more about this in chapter 8) after rental income.