Your fixed home loan rates are coming to an end, and you have no idea what to do. Luckily, there’s actually a variety of options available to you. Things like reviewing your home loan or looking for a better home loan are now available to you. Let’s take a look at what your options are and what works best for your situation when your fixed home loan rates are ending.
As weird as it sounds, you can realistically do nothing when your fixed rate ends. But if you do nothing at the end of your term, your loan will revert back to your lender’s standard variable rate. However, beware, variable rates at the end of fixed rates tend to be higher than usual because lenders know that some people don’t bother to switch lenders and cheekily chuck in a loyalty tax to those unaware or unwilling to switch.
It could save you money if you take the time to look at your lender’s other options or refinance with another lender. If you need help refinancing, we have a refinancing guide available for free on our website.
Extending Your Fixed Home Loan Rates
So, you won’t likely be able to extend your fixed loan at its current interest rate. But what you can do is fix your home loan again to an up-to-date rate. Normally, fixed rates are only offered for 1-5 years but it is possible to get a 10-year fixed-rate loan. The downside to this is that you might miss out if interest rates are cut which might cost you more money. The plus side is that if interest rates rise then you are protected.
Just a quick note here. It’s not the best idea to have a fixed rate if you are planning to sell or renovate using the equity in your home. Fixed rates tend to come with a lot of restrictions that often mean things like offset accounts are not available.
Breaking Fixed Home Loan Rates
This option is for people who don’t want to wait until their fixed rate has ended or don’t want to overpay on their loan. This will incur break costs and these will be incurred when you:
- Pay off your home loan early
- Sell your home during the fixed period (without loan portability)
- Make extra repayments that exceeds the set cap
- Refinance or switch to a new home loan or lender
The amount you’ll be charged varies but it is usually calculated on:
- The difference between the lender’s cost of funds now when compared to when the loan started.
- The amount of time left in the fixed term
Switching to a Variable Rate
Variable rates typically have lower interest rates but it does fluctuate based on the RBA’s cash rate. There are several benefits though like:
- Making uncapped additional repayments
- Easier to refinance
- When the cash rate drops, so does your variable rate
- Access to offset accounts, redraws facilities etc.
You could also go for a split loan where one portion is a fixed rate and the other is variable. You don’t even have to split the loan 50:50, it can be negotiated with your lender.
These are your options when you are nearing the end of your fixed home loan rate but if you’re wondering what might be the best option for you, consider reaching out to us at It’s Simple Finance for any enquiries you may have.