They say all good things must come to an end… and that includes your home loan fixed interest rate period.
If your fixed rate expiry is coming up, you might have started to think about what happens next and what action you need to take.
Or you might be sticking your head in the sand and avoiding the topic entirely. Be warned! The worst thing you can do is take no action at all.
If your fixed interest period is due to expire, then it’s time for a review of your finances.
Revisit your budget
A fixed rate expiry will mean a change to what is often one of our biggest expenses – the home loan repayment.
In a rising interest rate environment, this likely means a bigger expense you will need to allow for.
By revisiting your budget, you can make sure you can afford the new home loan repayment amount, or adjust your spending where needed.
Know your financial situation
Your financial situation is going to impact what options are available to you and what options might be best for you.
If there’s been recent changes to your income position such as job loss, income reduction or maternity leave, for example, this may impact your ability to refinance your loan. As a result, you may have to stick with your current lender on terms you may not be happy with.
If you have surplus cash flow that you want to use to reduce debt, a variable rate loan might be more appropriate so that you’re not as limited with the ability to make repayments.
Alternatively, if cash flow is tight, you might appreciate the stability of a fixed rate loan, and knowing your repayment amounts won’t increase during the fixed rate period.
By having a good understanding of your current financial position and future goals, you can determine what your needs are and what the best strategy is for you moving forward.
Look at what the market is doing
One of the main factors to consider when deciding between a fixed and variable interest rate is the current market.
While no one has a crystal ball, it’s important to consider what is happening with the economy, housing markets and interest rates. Are interest rates trending up or down? And what might this mean for both fixed and variable interest rate loans?
Get clear on your options
When your fixed interest term expires, you will need to choose between either re-fixing your loan for a period or switching to a variable interest rate loan.
This is also a good opportunity to review your existing loan provider against other loan providers, to ensure you are being offered a competitive rate.
With your market research in hand, it’s time to call your existing lender to request a rate review. You can let them know you are considering refinancing your loan and want to know what the best they could offer is. It might be time to switch lenders if they’re not prepared to offer you a competitive rate.
A Financial Adviser can help
If you’re unsure about your best path forward to navigate your fixed rate expiry, you don’t have to go it alone.
Our team at What if Advice + Accounting can assist you through the process by determining the best loan structure for your needs, researching different lenders, finding a suitable provider with a competitive rate, and navigating the refinance process if needed. Contact your Mortgage Broker today!
We’re financial advisor’s based in Toowong, come into our office or make an appointment on our page. We specialise in financial planning and debt management.