Lots of homeowners secured low fixed rate home loans during the past year or two, and these are due to expire for many over the next 18 months. Many people will find themselves rolling over into much higher rate home loans.
We’ve put together a list of ways to best prepare for this change and help you manage this transition with confidence.
It’s important to note that lenders will generally update you about a month before your fixed rate is set to expire. This will include the information you need, such as your new variable rate and your new monthly repayment.
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Find out if refinancing is right for you
Did you know that lenders often offer a higher interest rate to existing borrowers than they do to a new customer? This is what is informally known as the ‘loyalty tax’.
Therefore, it is important to review all the offerings available on the market as there could be a loan better suited to your needs – and potentially with a lower rate.
Understanding what’s on offer and what type of loan structure is right for your needs (fixed, variable, or split) will help ensure you are getting a competitive home loan.
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Talk to a mortgage broker
By calling on the help of a home loan expert, you will benefit from having a professional by your side to help you navigate the number of options that could be available to you.
They will also be able to determine how much your repayments could change on your new home loan.
A mortgage broker is not only here to help you find the solution that is right for you but also answer all your questions along the way so you can feel informed through the change.
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Start making additional repayments or save the difference
Once you know approximately how much your new repayments could be, it’s a good idea to find a way to transition toward your new repayment amount early.
You could potentially do this in two ways:
- Some lenders and home loan products will allow you to make additional repayments during your fixed-term, up to a certain amount.
Sometimes, this may incur what is called a ‘break cost’, which is essentially an extra cost that occurs when you make extra repayments beyond the lender’s limit thereby ‘breaking’ the terms of the loan. However, various lenders will allow you to do so without this fee on top.
However, it’s important to check with an expert whether you’d incur a break cost and if this solution is right for you.
- If your lender doesn’t allow for additional repayments or you would like to avoid paying the above cost, you could start saving the difference between your current fixed rate repayments and your potential new repayments into a separate savings account.
This is beneficial as when your repayments do change, you will already have some funds saved to allocate to your new repayments and will be used to the new level of payments.
A Resolve Finance mortgage broker can help determine if these options are suitable or available to you.
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Review your budget
Your fixed rate expiring means the time is ripe for reviewing your budget.
Common areas to cut back on include takeaway (looking at you UberEATS) and entertainment, but you could be surprised by the various internet, electricity, and insurance deals available if you haven’t looked for a while. Every little bit counts!
Streamlining your budget can never go astray and any extra money you can find could help you manage your new repayments more easily.
To get an idea of how much your new repayments could be, you can use our free repayment calculator, or you can get in touch with a Resolve mortgage broker to discuss.
Download our checklist here to help prepare and talk to a Resolve Finance expert about your home loan so you can move forward with confidence.
*Information on this page does not consider your personal needs and financial circumstances and you should consider whether it is appropriate for you. Lenders terms and conditions apply and may vary. All Financial services provided by Resolve Financial Solutions Pty Ltd trading as Resolve Finance ABN: 65 079 545 378 Australian Credit Licence No. 385487