Variable Vs Fixed Mortgage scheme
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Variable Vs Fixed Mortgage scheme
Ok i know its not a great time to purchase and i know this thread aint about trashing the company but would appreciate you smart people's thoughts.
Given that a person has about 5 years left here (i dont mean having to retire at 55), would locking in at the current fixed repayment scheme be a wiser thing than the variable.
I understand that if you are buying for first time a small apartment, variable is the way to go so you can afford to up-grade later, as in 7-10 years time the repayments may be double as they are now.
However, in the short term, buying a good size flat, am i right to believe the current fixed repayment scheme is the way to go???
I also think rates will go up in the short term but as things are crazy here, usually that means rents come down. eg as rates have gone down in last 2 years, rents have gone up!!! So if rent goes down, our allowance will also go down with it, hence why i think locking in is the way to go.
Any thoughts???
Given that a person has about 5 years left here (i dont mean having to retire at 55), would locking in at the current fixed repayment scheme be a wiser thing than the variable.
I understand that if you are buying for first time a small apartment, variable is the way to go so you can afford to up-grade later, as in 7-10 years time the repayments may be double as they are now.
However, in the short term, buying a good size flat, am i right to believe the current fixed repayment scheme is the way to go???
I also think rates will go up in the short term but as things are crazy here, usually that means rents come down. eg as rates have gone down in last 2 years, rents have gone up!!! So if rent goes down, our allowance will also go down with it, hence why i think locking in is the way to go.
Any thoughts???
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If you're sure that you're staying in HK only 5 more years then lock in using the fixed option. In August fixed is currently at 70K. That is ridiculous, and the highest it has ever been.
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Totally disagree. If you look at the difference between fixed and floating and the amount of time left on the housing, in this case 10 years, then you are far better off going floating. The very rare off chance that you may use the housing some time in the next xx years of your working life and that fact that the fixed is at it's current levels because the floating rate formula works is reason enough. If you think 70K is a lot then you probably would have thought 42K fixed was a lot when the scheme was first introduced.
Have a look at where 5% inflation puts 70K in 12 years. And the thought that KA has just gone 25 yrs on housing.
Have a look at where 5% inflation puts 70K in 12 years. And the thought that KA has just gone 25 yrs on housing.
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Never bet against inflation.
Fixing is a mistake in general. If you are 100% sure you will only need it for next 5 years - then maybe.
There is a very real chance that Western governments are going to try and inflate their way out of their current debt situation. And that will drag the rest of us along. $ 70 k fixed won't be much in ten years time........
Fixing is a mistake in general. If you are 100% sure you will only need it for next 5 years - then maybe.
There is a very real chance that Western governments are going to try and inflate their way out of their current debt situation. And that will drag the rest of us along. $ 70 k fixed won't be much in ten years time........
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if definite on 5 years fixed is prob the way to go. i reckon there is a 4 year break even between the two so any longer than that, variable.
this has pretty much worked for me going variable and many are kicking themselves locked in to 46K
this has pretty much worked for me going variable and many are kicking themselves locked in to 46K
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My 2 cents worth...
Are you taking into account any dips in the market?
The % diff between Variable and fixed?
Are the housing prices really going to go up alot further?
Tax to pay on the allowance?
If you take this into account, then you may be looking at about 10 years as the cross over point between fixed and VAR, taking inflation into account.
There are alot of other variables to consider.
I'm sure CX wouldnt roll over the current scheme if the housing index were to continue to skyrocket...
At the end of the day, it is what you are comfortable with. Are you happy locking in? Sure housing prices have been going up, but what happens if the market dives two days before your variable housing allowance comes up for renewal. There will be a market correction at some stage.
over the last two years, prices have risen a little, but not enough that one who has fixed can not afford to buy back into the market, especially when one is not paying for it. The game would be different, if we were actually paying the mortgage out of our own pockets...
My question is,; the AOA is sugesting we accept the rollover, is it too risky to ask for 25 years like Dragon is getting.... Then Variable might be the way to go, it will help those poor souls that want to fly ULR till age 65....
My view; youre going to use the housing to buy for 8-10 years, fixed. Any more, take the variable
Are you taking into account any dips in the market?
The % diff between Variable and fixed?
Are the housing prices really going to go up alot further?
Tax to pay on the allowance?
If you take this into account, then you may be looking at about 10 years as the cross over point between fixed and VAR, taking inflation into account.
There are alot of other variables to consider.
I'm sure CX wouldnt roll over the current scheme if the housing index were to continue to skyrocket...
At the end of the day, it is what you are comfortable with. Are you happy locking in? Sure housing prices have been going up, but what happens if the market dives two days before your variable housing allowance comes up for renewal. There will be a market correction at some stage.
over the last two years, prices have risen a little, but not enough that one who has fixed can not afford to buy back into the market, especially when one is not paying for it. The game would be different, if we were actually paying the mortgage out of our own pockets...
My question is,; the AOA is sugesting we accept the rollover, is it too risky to ask for 25 years like Dragon is getting.... Then Variable might be the way to go, it will help those poor souls that want to fly ULR till age 65....
My view; youre going to use the housing to buy for 8-10 years, fixed. Any more, take the variable
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Wish I had a crystal ball
404/ Number Cruncher any opinions?
I've been in Hong Kong long enough to have seen a couple of wild property swings. I have also watched guys "lock in" at 45k who are now kicking themselves
I keep thinking variable might be the way to go but what worries me is what happens to the "variables" when this agreement eventually gets terminated? If you have locked in I would imagine that you are fairly well covered as you have a value on paper with CX. (I know contracts are not always honoured!)
I'm looking at a property out in the countryside that will take around 9 years to pay off.
Help required - PLEASE.
I've been in Hong Kong long enough to have seen a couple of wild property swings. I have also watched guys "lock in" at 45k who are now kicking themselves
I keep thinking variable might be the way to go but what worries me is what happens to the "variables" when this agreement eventually gets terminated? If you have locked in I would imagine that you are fairly well covered as you have a value on paper with CX. (I know contracts are not always honoured!)
I'm looking at a property out in the countryside that will take around 9 years to pay off.
Help required - PLEASE.
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There is no right answer to the question variable or fixed. It depends on many factors. The most important factors are:
How long will you be here in HKG?
How certain are you of your previous answer?
Are you likely to upgrade your housing in the future?
For the guy who says 5 years then out, then fix. You have just taken a variable out of the equation - the only variables left are HKG interest rates and house prices;-/
If you think you will pay this place off in say 5 years then upgrade, then I would say float as chances are you will be buying a bigger place. You will have rent of the first place to assist in buying second place whether rents have gone up or not. If you had fixed 4 years ago you would now be trying to buy a house that has doubled in 4 years but your assistance has not.
Almost half of our pilots have joined only knowing a rising market. There are some guys who bought in 96 or 97 who are still waiting for prices to rise to what they paid back then. They saw equity losses of over 50%!
For the majority - probably staying for long term but the rates are attractive now.... Just imagine three scenarios;
1) house prices/rents don't change - then it really didn't make much difference fixing or variable.
2) house prices/rents fall - whilst you will get less money to pay off your house you will find buying the new place more affordable as if rents are falling presumably the purchase price has fallen too. Rents are 50-70K a month - prices are 5-10million. It takes a lot of years of a higher rent to wash out the loss on a property!
3) prices/rents rise. You will be able to pay off current place slightly more quickly but more importantly you will have a bigger monthly allowance to buy/upgrade to your new property.
Worst case, massive fall in rents/purchase price - you have 2 years before your assistance is reduced - then that is locked in for 2 more years etc- so a very slow (hopefully) decline in your assistance.
If you are sure you only want to buy one place and then are happy to rent after that, then fix-you have no risk to your repayments and then once place is paid off you will have the CX allowance, whether it has gone up or down, to rent a place.
Simplistic advice - when in doubt, float. If you are certain you are leaving in 5 years, fixed. The breakeven between the two in a rising market is 4-8 years depending on the rate of increase.
Try to buy for an amount such that it will be paid off in 5 or so years - 5 years is a long time in CX and HKG! Plans change quickly- you dont' want to have to forgo a basing opportunity as you need housing assistance to pay off a mortgage that is worth more than the property!
My other advice, take any financial advice a pilot gives you with a grain of salt;-)
How long will you be here in HKG?
How certain are you of your previous answer?
Are you likely to upgrade your housing in the future?
For the guy who says 5 years then out, then fix. You have just taken a variable out of the equation - the only variables left are HKG interest rates and house prices;-/
If you think you will pay this place off in say 5 years then upgrade, then I would say float as chances are you will be buying a bigger place. You will have rent of the first place to assist in buying second place whether rents have gone up or not. If you had fixed 4 years ago you would now be trying to buy a house that has doubled in 4 years but your assistance has not.
Almost half of our pilots have joined only knowing a rising market. There are some guys who bought in 96 or 97 who are still waiting for prices to rise to what they paid back then. They saw equity losses of over 50%!
For the majority - probably staying for long term but the rates are attractive now.... Just imagine three scenarios;
1) house prices/rents don't change - then it really didn't make much difference fixing or variable.
2) house prices/rents fall - whilst you will get less money to pay off your house you will find buying the new place more affordable as if rents are falling presumably the purchase price has fallen too. Rents are 50-70K a month - prices are 5-10million. It takes a lot of years of a higher rent to wash out the loss on a property!
3) prices/rents rise. You will be able to pay off current place slightly more quickly but more importantly you will have a bigger monthly allowance to buy/upgrade to your new property.
Worst case, massive fall in rents/purchase price - you have 2 years before your assistance is reduced - then that is locked in for 2 more years etc- so a very slow (hopefully) decline in your assistance.
If you are sure you only want to buy one place and then are happy to rent after that, then fix-you have no risk to your repayments and then once place is paid off you will have the CX allowance, whether it has gone up or down, to rent a place.
Simplistic advice - when in doubt, float. If you are certain you are leaving in 5 years, fixed. The breakeven between the two in a rising market is 4-8 years depending on the rate of increase.
Try to buy for an amount such that it will be paid off in 5 or so years - 5 years is a long time in CX and HKG! Plans change quickly- you dont' want to have to forgo a basing opportunity as you need housing assistance to pay off a mortgage that is worth more than the property!
My other advice, take any financial advice a pilot gives you with a grain of salt;-)
