Let’s talk about why DHOAS interest rates could be higher than the average loan. 

The first thing is that there are only three lenders that are able to provide you with a DHOAS loan. Compare that to the rest of the market where there’s dozens and dozens and dozens of lenders.

So when you’ve only got three lenders available, it reduces the amount of competition that’s in the market, whereas if you’ve got dozens and dozens of lenders it increases the competition. When you’ve got increased competition, it lowers the rates, because there’s more competition for your business out there. 

Automatically you’ve got a bit more competition. And those three lenders know that they’re only going to make it slightly better off for you to be able to have that DHOAS loan with them than you go to another bank so they can just do the minimum that’s required.

The other reason why you might see a slightly higher interest rate that you see over there than with normal lenders is that DHOAS lenders, believe it or not, actually have to pay a commission back to the government. So then, when you go through your DHOAS paperwork, you’ll actually see it in there. It’ll be like, “Hey, we are declaring this upfront that we have to pay back to the organisation that has brought you in from a DHOAS perspective.” So be wary of the reasons why DHOAS has those slightly higher rates in many instances.

Let’s talk about DHOAS rates: fixed vs variable rate. 

Another topic that people get confused about is going with fixed versus variable. They’re always saying variable; it’s too high. 

Where ever you are in your portfolio, there’s always going to be a caveat when you’re going to go to fixed versus variable. The variable is a negotiable rate. It doesn’t move. The RBA can change that if the bank follows through. If you’re fixed, you’re going to get locked in. 

You’re not going to have your offset account. You’re not going to get your rater. So you really have to weigh up to where it is that you want to be with your financing debt and what’s the most suitable structure for yourself. So when we are looking at DHOAS, and we are talking about the rate, we want to be prepared to be able to go and compare apples with apples and oranges with oranges. 

Do your homework, crunch those numbers, make sure it’s the best process for you in going forward with DHOAS.