With Indi you can get all the benefits of payment flexibility without the higher cost that banks charge.
Payment flexibility means you can pay more if you want to. You might want to adjust your regular payments, to pay more than the minimum when you have surplus income (and adjust back down when times are tight). Or you might want to make lump-sum payments if you come into larger amounts of cash (eg if you get a bonus or a tax return).
With Indi you have complete payment flexibility. You can adjust your regular payments up or down by as much as you want, as often as you want, as long as they’re at least the minimum. You can also make lump sum payments whenever you want, without penalty. All this flexibility comes at no extra cost, you just pay our low floating rate at all times.
At a big bank, with fixed rates, you don’t really get payment flexibility. There are strict limits on how much extra you can pay without penalties. But most people need and value payment flexibility, so there’s a workaround. You have to put some portion of your mortgage on floating or revolving. This floating portion has flexibility, so you can increase your regular payments on it, and make lump-sum payments against it.
However, at the bank this flexibility comes at a cost. The bank floating rate is significantly higher. So you have to balance this carefully. If your floating portion is too small then it might be paid off before your next re-fixing, so you lose the flexibility until you can rebalance. On the other hand, if your floating portion is too big then you’ll be paying the higher cost for no benefit.
Even if you get the size of your floating portion just right it comes at a cost that increases the average interest rate you pay. People tend to focus on the headline fixed rate they get, but it’s more important to calculate your effective rate, the total average rate you pay.
Example: a typical floating portion is around 15% of the total loan, and floating rates are usually at least 1.50% higher than fixed rates. That means that your effective rate is 0.23% higher than the headline fixed rate you have in mind.
When comparing Indi’s low floating rate to other rates, make sure to factor in the 0.23% extra you’d be paying for payment flexibility. Over 3 years that’s ~0.70%, which is more than the amount of "cash back" you can sometimes get by switching to a big bank every 3-4 years. The difference is with Indi you get the benefit year in and year out, without needing to keep switching, and without needing to rebalance your portions. It’s just set and forget.
Check out our calculator to compare the total cost of your portions to Indi’s low floating rate.
Disclaimer: Indi reserves the right to change floating rates at any time and does not guarantee savings in comparison to any other rates. Market conditions can change unexpectedly, which may result in different outcomes than expected. Nothing in this article is financial advice. Indi does not provide financial advice, and recommends you consult an advisor if you have questions or concerns.