
If your fixed rate home loan expires in less than 12 months, it’s a good idea to now start thinking about what could happen when your fixed rate term ends. Once you’ve done that, you have three options: re-fix, refinance, or revert. So let's explore these three options...
Fix your loan again
Your lender will nornally notify you a month or two before your fixed term ends to discuss your options. If you’re happy with the interest rate and loan features offered, then you could agree to another fixed term with the same lender.
Refinance your loan
When it comes to refinancing your home loan, you can stick with the same lender or bank and switch the loan you have, or you can move to another bank or lender entirely. Switching may get you a lower interest rate as a new customer, but make sure you ask about upfront and ongoing fees or charges, so you don’t end up paying even more each month.
One easy way to do this is to look at the comparison rate. The comparison rate is the effective rate you’ll be paying once the fees and charges are taken into consideration, and every lender is required to display it.
Remember, if you’re leaving your current lender, you will likely be charged exit fees.
Revert
If you don’t do anything when the term of your fixed rate home loan ends, the interest rate will revert to a “standard” variable rate set by the lender or bank. This rate is often higher than your fixed rate - and could be the highest variable rate on offer - and as a result, likely will increase your monthly repayments.
You may find the monthly repayment increase is even larger if your fixed term loan is set to expire after your lender’s “standard” rate has risen. So, make sure you're across the revert rate details to avoid a repayment shock.
How can I prepare for a rate increase?
If you’re currently enjoying a low fixed rate, you have time to prepare for a potential rate increase when your current term ends. One great place to start is to review your current spending and create a budget. This will help you to see what money you have available and know if you’ll be able to afford an increase in repayments when your fixed term ends.
Sticking to a budget will also allow you to save some extra cash. Find out more about how to prepare for a rate rise.
Need more help?
The cash rate, inflation and interest rates can be confusing but we’re here to help. If you would like to talk to someone about your existing home loan and get ready for future changes, you can book an appointment to speak with a BCU Bank mobile lender.
Important information
Banking and Credit products issued by Police & Nurses Limited (BCU Bank).
Any advice does not take into account your objectives, financial situation or needs. Read the relevant terms and conditions, before downloading apps or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available on our website or upon request.