What To Consider Doing When Your Fixed Rate Home Loan Ends

Whether you’re looking to buy, or you’ve already got a mortgage to your name, chances are you’ve seen the latest fixed rate loan news updates. With many Aussies locking in record-low interest rates during the COVID-19 pandemic, their fixed rate period is likely ending soon, if not already. This means that a large portion of borrowers will be rolling off their nice, low fixed rate onto a much higher interest rate. 

If you’re currently approaching the end of your fixed rate term and feeling a little uneasy, we’ve got a few tips to help you navigate your options.

When do fixed rate mortgages end?

When you first took out your fixed rate home loan, you would have locked your interest rate in for a set period of time. Most lenders offer fixed rate terms anywhere from 1 to 5 years. The fixed rate term you selected will determine when your fixed rate mortgage will end.

If it’s been a little while since you took out your home loan, you might be a little hazy on the exact date your fixed rate term is up. Luckily, most lenders display the expiry date for your loan online or via your banking app for easy access. Alternatively, it will also be listed in the mortgage documents you were provided with when you first took out your loan.

What happens when my fixed rate ends?

Once your fixed rate home loan wraps up, your mortgage will automatically roll onto a variable rate, also known as a revert rate. That is, of course, unless you take action ahead of time. 

When your fixed rate ends, you’ve typically got three options to choose from. You can either:

1. Refix your loan: You might choose to refix your home loan for another fixed rate term,
2. Swap to a variable rate: If you prefer the variable rates currently on offer with your lender, you might choose to swap to a variable rate loan that’s different from the revert rate that your mortgage is set to roll onto, or
3. Refinance to a different lender: You might prefer to refinance your home loan with a different lender if they’re offering a more competitive interest rate or better loan conditions.

It’s up to you to decide which path works best for you.

Preparing for the end of your fixed rate mortgage

As you approach the end of your fixed rate term, it’s important to be proactive and start taking steps to secure the best loan for your needs. Here are a few tips to help you get organised before you roll off your fixed rate.

Start early

Being organised means getting in early. With this in mind, it’s sensible to begin researching and planning your next move at least 3 months before your fixed-rate period ends. This gives you plenty of time to explore your options without rushing into a decision.

And remember, depending on what’s right for you, certain options take time, which could mean you’re left paying the revert rate if you’re not organised in time. For example, if you choose to refinance with a different lender, it can take anywhere from a few days to several weeks to complete. So, if you don’t want to be stuck paying the revert rate, you’ll want to get in early.

Shop around

There are stacks of different lenders to choose from, so don’t be tempted to just rely on your current lender’s offers. Instead, take your time to explore other mortgage options and different lenders. You can use mortgage comparison websites, or if you’re after more tailored advice you might want to consider consulting a mortgage broker. Not only will they be able to provide a broader view of available options but they might also be able to negotiate an even better deal for you.

Check for fees and penalties

Most banks and lenders charge break fees for leaving a fixed rate mortgage before the term is up, so it’s worth familiarising yourself with the penalties and fees that come with switching products or lenders. 

With that said, there are also costs that come with refinancing your home loan, including establishment or application fees, property valuation costs, settlement fees and service fees. Take note of the different fees when it comes time to compare mortgage products to decide which is the best option for you.

Consider your financial goals

Making changes to your mortgage is a major financial decision, so it’s important to reflect on your financial goals so you choose the best option for you. Assess your current financial situation and future plans. If you’re anticipating any significant life changes, like starting or expanding your family, moving or changes to your job, it’s well worth choosing a mortgage product that will help you through this transition period.

Compare different mortgage products

Once you’ve done your research and narrowed down your options, it’s time to compare different products. Consider the pros and cons of fixed rates, variable rates, split rates and different mortgage features and facilities. Most likely, each option will have its own benefits and risks, so it’s up to you to find the best option based on your financial situation and the current market conditions.

Negotiate with your current lender

Once you have a good idea of what else is out there, it can be worth contacting your lender to see if they’re willing to negotiate or offer a more competitive rate. In some cases, they might offer special deals to retain existing customers. That way, you can take advantage of a better deal without having to switch lenders. 

If you’re approaching the end of your fixed rate period, why not check out what’s on offer when you refinance to Unloan? We’ve made it easy to see how much you stand to save with our nifty savings calculator. Check out our loan features to learn more today. 

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

‍Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000.

‍Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

‍There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.