Nov 14, 2019 6:15:00 AM

What to do if your fixed rate loan term is nearing the end

Topics: Refinancing Options, Variable versus Fixed, Variable Interest Rate, Fixed Interest Rate, Financial Advice, refixing, Australia Mortgage Broker 0

If your fixed rate loan term is nearing its end, there’s never been a better time to review your mortgage. With interest rates at historic lows, you’ll need to decide whether to roll again for another fixed term or take advantage of cheaper variable rates and pay down some serious debt. Be aware though, if you do nothing, lenders may simply put you onto their most expensive variable rates, so it’s vital you take some action. Here are your options:
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1. Refinance
Refinancing is a good option if your lender’s interest rate is no longer competitive and there are lower interest rate deals available, as in the current property market environment. If your fixed rate loan term is due to expire, this could be the best time to refinance and secure a much lower rate.

If you choose to refinance you can do this either with your existing lender or with a new lender. A Mortgage Express broker can assist you with some options as we work with a panel of lenders and can help you identify a lending solution to fit your needs.

It may make more sense to refinance to a split loan with a portion of your loan remaining fixed while the other portion moves to a variable rate loan. This means you have some stability in terms of repayments while still being able to pay down extra on the variable portion without any penalties.

When refinancing, it’s important you compare not just interest rates but loan features too, and whether your loan term will be on a fixed interest rate or a variable interest rate as this can drastically impact your long-term financial obligations. Here again, our brokers are experienced at helping you weigh up the pros and cons of each loan solution.

2. Refix
Some homeowners choose to “set and forget” believing this to be the best option. After all, it was hard enough finding a lender, why complicate matters now! You can choose to refix your home loan with your current lender if your lender allows this and you would roll over your existing home loan to a new term.

The biggest disadvantage to doing this is that you could potentially be missing out on far better deals as you won’t qualify for any special offers your lender may be advertising to new home loan customers.

If you are considering selling your home or you have some renovations planned, refixing your home loan may not be your best option. Similarly, if your income has increased and you’d like to pay in a lump sum or increase your repayments, refixing your loan won’t suit.

3. Revert
When your loan term ends, your home loan may revert to a much higher interest rate if you don’t choose to refinance or refix. This can happen without any paperwork and you may not even be aware of the change until you have to make a higher repayment. Even a one per cent rise in your interest rate can set you back thousands of dollars and years added onto your mortgage, so it’s important you take action by either refinancing or refixing your home loan.

If you’re unsure which option would best suit your situation, talk to one of our brokers. We’ll help you identify a financial solution and assist you with refinancing or refixing your home loan.



Disclaimer:

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFC