Benefits of a fixed loan

With the end of financial year fast approaching, investor thoughts often turn to tax management strategies. At this time of year around one in four of our Investment Loan clients choose to fix their interest rate and prepay their interest costs. It is well known that there are taxation benefits for some clients who fix and prepay, however the reasons for fixing are not limited to this. Many clients choose to fix and pay their interest monthly in arrears to obtain interest cost certainty, and potentially savings, while maintaining their monthly interest payment cycle. The reasons for fixing will vary from client to client so it’s important to consider the interest rate option that best suits your circumstances.

Tax Effectiveness

Interest paid on an investment loan is generally tax deductible (depending on your circumstances). The amount of interest that may be claimed in a financial year would include any interest paid monthly and any interest paid in advance. This means a client who during the current financial year has paid 12 months of variable interest and also paid the next 12 months of interest in advance may be able to claim 24 months of interest as a tax deduction.

Please note that CommSec Adviser Services does not provide tax or interest rate advice. We recommend you speak to your financial adviser or tax professional.

Interest Savings

You could save on interest if your fixed interest rate is lower than the average variable interest rate that would have applied to you over the same period.

Try our new Fixed vs. Variable Interest Calculator to see how much interest you may be able to save.

Interest Cost Certainity

Fixing your interest rate offers you the knowledge of exactly how much interest you can expect to pay during the fixed interest term. This can assist you with managing your monthly expenses and cash flow, as well as provide you with peace of mind.

Flexibility

A CommSec Adviser Services Investment Loan offers many great features including the flexibility to:

Fix ALL or PART of your outstanding loan balance
If your loan balance fluctuates from time to time or you're unsure of the future direction of interest rates, you may wish to only fix a portion of your outstanding balance.

Pay your interest yearly in advance or monthly in arrears
Depending on your strategy or circumstances you have the choice to pay your interest yearly in advance or monthly in arrears.

Capitalise/Borrow the interest amount
You have the option to capitalise/borrow the interest amount and  you can choose to capitalise the amount to your variable loan (all payment options) or fixed loan (interest paid yearly in advanced option only).