mGa KuRo-KuRo Ni Ka UrO

Tuesday, August 22, 2006

Fixed versus Variable, or Split

Isa na namang nagbabagang tip. Hindi, hindi po tip sa karera. Tip ito kung paano kayo makaka-menos sa pagbayad ng interest rates sa bangko sa inyong mga mortgages. Banks won’t tell you about this, unless you ask them, because it is not to their advantage.

When you borrow for a home loan, the bank will ask you what interest rate you prefer –variable rate or fixed rate. Kapag variable ibig sabihin paiba-iba depende sa prevailing rates. Sa kakalukuyan, 9.55% per annum ang prevailing variable rate. Bukas makalawa maari itong magtaas o magbaba depende sa market conditions. Kaya maaaring paiba-iba din ang dapat mong bayaran monthly. Mahirap mag-budget. Ang adbantahe naman pwede kang mag-advance payment anytime without penalties. Normally, variable rate is good if you have no intention of keeping the property longer than 6 months, because you can pay off the bank anytime with no penalty.

Most people, however, choose fixed rate. Fixed rate dahil nakapako yung rate within a given period. Sa kasalukuyan, eto ang fixed rates ng karamihang bangko.

  1. Fixed for 6 mos 8.50%
  2. Fixed for 1 year 8.40%
  3. Fixed for 2 years 8.10%
  4. Fixed for 5 years 7.75%

Ang advantage ng fixed rate, una, usually mas mababa siya sa variable rate. Pangalawa, fixed din ang payments mo, kaya madaling mag-budget. Pangatlo, may protection ka kung sakaling magtaasan ang bank rates, dahil di tataas ang amortizations mo. Flipside nito, kung magbagsakan naman ang mga rates, lugi ka, kasi di bababa ang payments mo. Fixed nga eh. Isa pang disadvantage, di ka pwedeng mag-advance payment ng lump sums without incurring a penalty from the bank.

Halimbawa, ang utang mo $200k. Karamihan sa mga bangko papipiliin ka lang ng isang rate. Looking at the above rates, 5 years ang lowest. Ok sana ito pero disadvantage naman nakatali ka sa 5 years contract. Kung sakaling bumagsak ang mga interest rates bago matapos ang 5 years, hindi ka makaka-avail ng bagong rates. Isa pa di ka basta makakabayad ng lump sum within the 5 year period. Kung pipiliin mo naman yung 1 or 2 years fixed, it means you'll be paying (unnecessarily) a higher interest rate.

The SOLUTION: Something your banks will NOT tell you about, is to SPLIT your loan into different rates. Halimbawa:

  • $100k fixed for 5 years
  • $80k fixed for 1 year
  • $20k variable rate

What are the advantages of splitting?

Mainly, flexibility. You can take advantage of the lowest rate which happens to be the one for the 5 years fixed and at the same time by putting some money into variable or fixed for lesser number of years, you have the option of paying lump sums in advance and taking advantage of any lowering of interest rates. In the above split, maaring iniisip mo na kaya mong bayaran soon yung 20k. Eg. You expect to sell some properties overseas. Iniisip mo rin na after 1 year baka bumaaba ang interest rates. Therefore after 1 year kapag expired na yung contract for the $80k you can renegotiate for a lower interest rate.

Splitting your loan into different rates allows you to take advantage of the best possible combination of rates and gives you more flexibility to handle your repayments. Malinaw ba? Okidokes, split na muna ako.

15 Comments:

  • thanks for the info. i never knew about the possibility of splitting the loan. mukhang ok ito.

    By Blogger JO, at 5:01 PM, August 22, 2006  

  • Galing Ka Uro thanks sa infor his will be much appreciated ng mga kabayan natin nag aabroad to have their moeny well managed.

    By Anonymous AJDubai, at 9:29 PM, August 22, 2006  

  • hmmm, baket ngayon mo lang sinabi ito? tapos na loan ko eh! daya naman!

    pero salamat din.

    By Blogger Mmy-Lei, at 9:37 PM, August 22, 2006  

  • This is a good info...I didin't know that. For sure, i'll keep this in mind. Next year na kami mag-re-renew. Salamta

    By Blogger Leah, at 4:00 AM, August 23, 2006  

  • pardon the spelling mistakes, di kasi ako nag-preview eh

    By Blogger Leah, at 4:02 AM, August 23, 2006  

  • magkano ba ang fee mo kung i-hire kitang financial adviser? ang dami mong alam sa mga loan gaya ko rin ba ikaw na mahilig mangutang sa 5-6 at mga bumbay back home?
    speaking of bumbay may 5-6 ba dito at bahay sanglaan?

    By Blogger atoy, at 8:48 AM, August 23, 2006  

  • This comment has been removed by a blog administrator.

    By Blogger Senorito<- Ako, at 9:33 AM, August 23, 2006  

  • Went to the bank the other day ang nagtanong tanong lang.. geez your right.. hindi nga binanggit yung split rates !! arrrghh..

    By Blogger Senorito<- Ako, at 9:42 AM, August 23, 2006  

  • Ang baba ng interest rate compared sa pinas, kaya pala yung ibang nag loloan dito eh nilalagay din sa time deposit sa atin kung wala talagang paggagamitan pa to take advantage of the lower interest rate.

    By Blogger Ann, at 9:48 AM, August 23, 2006  

  • jo,
    you're welcome.

    AJDubai,
    you're welcome too. kumusta mo ako kay aga. hahaha

    mmy-lei,
    di ka kasi nagtanong eh. anyway, sa susunod na mag-loan ka, alam mo na.

    leah,
    glad to share this info. hope next year bumaba ang mga rates.

    atoy,
    sayo walang bayad. di ako mahilig mangutang ng 5-6. dito sa akl may mga pinoy na nagpa-5-6. at marami din ang umuutang lalo na yung mga mahilig sa casino. tsk! tsk!

    senor,
    no the bank won't mention splitting kasi mas hassle sa kanila.

    ann,
    actually sa Aussie, US at Canada mas mababa pa nga eh. pero compared sa pinas mababa na rin dito. si esmi nga nagiisip umutang dito tapos magpapatayo ng apartment sa pinas. pinag-iisipan pa lang naman.

    By Blogger Ka Uro, at 1:15 PM, August 23, 2006  

  • pwera biro, totoo ba na may pinoy jan na nag papa 5-6 sa mga pinoy na mahilig sa casino?
    wala bang batas laban jan dito sa new zealand?

    By Blogger atoy, at 3:18 PM, August 23, 2006  

  • may natutunan na naman ako...pero ayokong mangutang sa bank, pwede bang sayo na lang ako mangutang kuya...muhahaha....

    By Blogger idealpinkrose, at 3:34 AM, August 24, 2006  

  • there's only two possible solutions here, fixed or variable. and the bank is obliged to inform the client for options, i guess it's because french people are kuripot and numero unong reklamador, they have to do their job right. otherwise, they could ask for dedommagement or get their money back with interest.

    i guess for longterm loans, it's better to opt for variable here in france to take advantage of current value in the market. esp now that the tendency goes to incite people to increase consumption, thru utang, so interest rates becomes more interesting.

    By Blogger Analyse, at 7:07 AM, August 24, 2006  

  • Ka Uro,
    Para kang carrots, "pampalinaw ng mata"....kaya yung mga nalalabuan ay madaming napupulot na kaalaman sa iyo.

    Again, salamat sa mga tips! :-)

    By Blogger Rhada, at 7:28 PM, August 24, 2006  

  • Iba ka talagang mag-tip, KU.

    By Anonymous malaya, at 5:32 PM, August 26, 2006  

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