My fixed rate has ended … What should I do?

If your fixed rate loan has ended or is ending soon, then you would be pleased to know that you just might be in the best position to look for a better competitive deal, that suits your current financial situation.

Not everything lasts for ever…..and such is the case with fixed loans! If your fixed rate loan has ended or is ending soon, then you would be pleased to know that you are in the best position to look for a better competitive deal, that suits your current financial situation.

Your circumstances may be beckoning you to make the switch to a variable interest rate, or you may even want to opt for another fixed rate loan. 

However your situation may be, it is important to remember that you do have options.

Do I need to do anything now that my fixed-term loan has ended?

Your home loan will most likely revert to your bank’s standard variable rate, in the event that you don’t take any action close to the time period in which your fixed term will end, and the variable will normally be even higher than the usual rate.         If you want to extend the fixed rate loan term, then you must endeavour to advise your bank before the expiry date.

At this point you can lock in a competitive interest rate by refixing your home loan with your lender, but if you are seeking a interest rate that has more stability, without locking into a rate for a long period of time. Then you might even benefit from a split loan in which one part of your home loan balance has a fixed rate. Or you could even consider a one to two year fixed rate loan, to ensure that your interest rates still have strong stability over time.

Are there any penalties for breaking a fixed rate home loan?

You are more likely to incur penalties known as “break costs” (in which borrowers break the terms on their loan agreement), if you over pay on your home loan, or refinance your mortgage before your fixed term expires. 

Your lender will determine amount that will be charged, based on the following:

  • The difference between the lender’s cost of funds at the time the loan was settled, and the cost of funds now, at present.
  • The amount of time that you have left in the fixed term contract.

If you plan to break your fixed rate home loan, then it would be wise to speak to you lender first. In order to determine how much your “break fees” will be. Such information will also help you determine whether or not it would be beneficial to take such a step.

Variable interest rates

In some cases, borrowers may prefer to switch to a variable rate loan, after their fixed rate loan has finished, as variable rate mortgage has many appealing attributes:

  • Access to loan features such as loan portability, redraw facilities, and offset accounts.
  • Your interest rate will most likely decrease, when the cash rate drops down (and vice versa).
  • Uncapped extra repayments.

A variable rate mortgage will normally be accompanied with an interest rate that is often significantly lower, in comparison to a fixed rate loan. However a variable interest rate may oscillate from time to time, depending on the RBA cash rate).   

What happens if interest rates go up when my fixed period ends?

If interests rates go up when your fixed term ends, there is generally not much that can be done, except that you diligently seek an interest rate that suits your financial needs.

Bear in mind that you don’t need to limit yourself to one lender.     Shop around! Review all home loan products available, and evaluate any costs that may be associated with the home loan. Before you commit to any home loan product, in order to ensure that you obtain a good deal.

If you are not sure about how to proceed, then it might be in your interest to chat with one of our friendly mortgage brokers at Abacus Home Loans.

Speak to a financial expert!

Abacus Home Loans is here to help, and your concern is of great importance to us. Our friendly team will strive to help you find an interest rate, that is beneficial to your financial needs. 

Call Abacus Finance on 1300 268 686, or email us today!       info@abacusfinance.com.au 

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

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