Do you have a fixed-rate home loan that’s coming to an end soon? It can be a stressful time, particularly with rate rise news dominating the headlines. So, let’s help you prepare.
Like many Australians, you may have taken advantage of the interest rate good times by locking in a very low rate.
But as they say, all good things must come to an end.
The Reserve Bank of Australia (RBA) has estimated that 800,000 fixed-rate loans will end this year.
If that includes your loan, below are some tips to help you navigate the transition to a higher repayment or interest rate smoothly.
Get help to crunch the numbers
Variable interest rates have been rising in recent months. And you can expect your mortgage repayments to follow suit once your fixed-rate loan contract ends.
Do you know how much extra you may have to pay each month? And where will you find the extra cash? Giving your budget a tidy-up now may put you in a better position to decide what loan product will suit you going forward to help you meet your repayments.
Speak to a lending specialist. They can crunch the numbers for you, provide a range of options, and let you know the best deal available to you. From there, you know the adjustments needed in your budget. If needed, they can also look at debt consolidation options for you to really help bring down your monthly debt commitments.
Consider cutting back on non-essentials (streaming services, takeaway coffees, alcohol, restaurants) and look for cheaper offers on your big-ticket bills like insurance and utilities.
Doing so now can also help you save up a buffer that’ll ease your transition to future higher loan repayments.
Make sure you’re rolling to a good rate with your lender
One of the worst things you can do when rolling off a fixed-rate loan is to simply accept the variable rate your lender automatically provides.
And if you look at your contract fine print, you’re probably rolling to a “standard” variable rate.
Lenders are more likely to offer attractive rates to new customers, not their existing ones. It’s often referred to as the “loyalty tax”.
Before your fixed-rate contract ends, we can talk to your lender and let them know you’re exploring your options. That way we help keep them honest, but also see if you can get you a better deal if need be.
In order to keep you on board, they may very well make an offer you find acceptable.
Do you want to refix?
Continued rate rises are expected in 2023 and depending on your situation, you may wish to refix your loan.
You could also consider a split loan – where part of your loan has a variable rate, and the other part is fixed. That said, not all lenders allow you to refix all or part of your loan.
If you want a fixed or split loan and your current lender won’t provide it, then you may want to explore your options elsewhere by refinancing.
This brings us to our next point.
Time to refinance?
If your existing lender doesn’t come up with the goods, then refinancing is an option.
Refinancing may get you access to rates and features that banks use to woo new customers. And it can potentially save you thousands.
According to 2022 PEXA data, refinancers saved on average $1,524 per year. The ACCC reported in 2020 that mortgagors with 3 to 5-year-old loans paid an average of 58 basis points more in interest than new lenders.
If you’re considering refinancing, you may want to act sooner rather than later. With house prices falling, it’s important to make sure you have enough equity in your home to refinance.
We can help
There are also lots of people on fixed-rate home loans wondering just what options will be available to them once their fixed-rate period ends.
Some options we can help you explore include refinancing (which could include increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.
This is where we come in. A free review and a bit of advice can help you save money now or prepare better for the future.
Nathan Lewis is the principal and senior lending specialist of LJ Hooker Home Loans Brisbane East.
With a strong background in mortgage lending and the property industry, Nathan knows how to provide his clients with the very best service and ensure that their loan requirements are being met.
Nathan can support you whether you are buying your first home, upgrading, or securing an investment, refinancing and or restricting loan structures. Nathan will guide you through the process from start to finish, putting your mind at ease. He can also provide you with the very best refinance packages to help you save money, lower your repayments, or access your property equity.
Our fast home loan approvals are backed by unique lending products tailored towards property owners. Give Nathan a call today.
Franchise Owner | Senior Lending Specialist
0416 881 812