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Fixed rate home loan expiring soon? Here’s what to do next

If you're a homeowner with a fixed-rate mortgage, then you've probably been enjoying the benefits of having a stable interest rate. When your fixed rate term comes to an end it can have a big impact on your household budget so it's important to understand what happens next and explore your options.

What happens next

When your fixed rate term comes to an end, your loan will revert to a variable interest rate with your lender.  If you fixed at a time when interest rates were much lower, this could see your repayments increase as the interest you’re paying on your loan goes up.  And when interest rates go up – or down – in the future your repayments will continue to change.

If you want to have more certainty about your repayments, you can talk to your current lender about locking in a new fixed rate for your home loan.  Or you can look at refinancing your home loan – on a fixed or variable rate – with a different lender.

How you can plan ahead

Waiting until the end of your fixed rate term will give you less time to explore your options and think about what will work best for you.  Here are five steps to help you get ready and plan ahead for a good outcome:

1. Think about your financial goals

Getting clear on what’s important for budget and lifestyle can help you decide what to do next with your home loan.  As your fixed rate term comes to an end, here are some questions to ask yourself:

  • Do you like knowing how much you’ll be paying each month?
  • Are you prepared to budget for changes in interest rates?
  • Do you want the freedom to refinance at any time? This may not be an option if you choose to go with a fixed rate again.
  • Do you want the flexilibity to make extra repayments on your home loan?

2. Fixed, variable or split

Answering some of these questions can help you decide whether to go with a fixed rate again, switch to variable, or split your loan into a fixed and a variable portion.

No one can know what will happen with interest rates but it’s also worth looking at how rates have been changing in recent times for an idea of what could come next.  If you expect interest rates to go up, locking in another fixed rate might be wise for stability.  On the other hand, if you believe rates will go lower, a variable rate could bring potential savings on interest in the future.

2. Negotiating with your lender

Speak to your current lender about the best rate they can offer you.  They might be able to give you a better deal to keep your business.  On the other hand, some lenders only make their best rates available to new customers so it makes sense to explore interest rates on offer elsewhere.

4. Shop around

Coming to the end of a fixed rate term is a great time to compare rates from other lenders.  You’ll need to go through all the steps to apply for a new loan, but this can definitely be worth it to save on your repayments and pay less interest over the life of your loan.

5. Start early

Add a note in your calendar about when your fixed rate expires and set a reminder about three months before so that you can start preparing.  This will give you time to compare options and apply for a different loan with a new lender if that’s the best choice for your situation.

Get in touch if you need a hand

At Cairns Bank we undersand that refinancing can be tricky, with lots to consider.  As your local, customer-owned bank, we take the time to understand your needs and talk you through the options that you have.

If you’re looking to refinance your loan, drop in for a cuppa and chat about which options are a good choice for your situation.