How to navigate the end of your fixed-rate home loan

July 20, 2023

Navigating the end of a fixed-rate mortgage can be stressful, but with Rate Money by your side, you won’t have to face it alone.

House with coins depicting saving money and home loans

The Reserve Bank of Australia reported around 880,000 fixed-rate home loans will expire and switch to variable rates in 2023. These loans were taken out, during 2021-22 as borrowers sought certainty during Covid-19. This has led to a concern for many borrowers, who are now facing the possibility of becoming mortgage prisoners.

Mortgage prisoners are borrowers who are unable to refinance their loans, even if they are up to date with their payments. This can happen if the borrower’s property value has fallen below the amount owing on the loan, or if the borrower’s interest rate has increased to a level that they can no longer afford.

As a result, if you took out fixed-rate loans during the pandemic you may now find yourself unable to refinance your loans when your fixed-rate period ends. If you’re approaching a mortgage cliff, take a look at our top 5 tips to ease the transition.

5 tips if you are coming off your fixed-rate

Get your property revalued now if you think the value will decrease

If you think the value of your property is in decline, get it revalued now. This could be the difference between having enough equity to refinance. Banks assess the value of your home on current comparable sales. Most evaluations last between 90-180 days, so you can coincide it with your fixed-rate term ending. Ensure your property is in good condition and make some quick cosmetic touch-ups to put it in the best light.

aerial view of Australian neighborhood depicting the climate of fixed rates coming to the end

Make extra repayments before your fixed-rate ends

Paying off your home loan early can be a wise decision, especially if interest rates are rising. As it will allow you to reduce your home loan balance before interest rates rise and can save you a significant amount of money in the long run.

For example, if you have a $500,000 loan with an interest rate of 4%, and you make an extra $10,000 in repayments each year, you could save over $20,000 in interest over the life of your loan. At Rate Money we offer a flexible range of loans that can allow you to make up to $10,000 in extra repayments on your fixed-rate home loan.

In addition to saving money, paying off your home loan early can give you peace of mind. You’ll know that your home is debt-free, and you’ll have more financial flexibility in the future.

Consider moving to an interest-only loan and or consolidating your debts

If you’re experiencing cash flow issues and are struggling to pay down your mortgage, an interest-only loan or consolidating your debts (tax debt, car loans, credit card debts) might be a good solution for the immediate term.

At Rate Money we provide you with the option to pay interest- only on your owner-occupied property (not just investment properties) for a set period of time. So while interest rates are high, this could be a great way to reduce your monthly repayments over the next two or so years. It will free up cash flow and help your financial positioning, while alleviating stress.

bar graph depciting the difference between rate money tax debt repayment and the ATO tax debt repayments

Consider refinancing to a fixed-rate mortgage

If your fixed-rate mortgage is coming to an end, and you don’t want to face the uncertainty variable interest rates bring, consider refinancing with Rate Money to a fixed-rate mortgage. This way you can lock in your interest rate so you won’t have to worry about your payments going up with each rate rise.

Talk to a Rate Money Home Loan Specialist

If you’re a self-employed borrower coming off your fixed-rate mortgage, you may be feeling a bit anxious about what the future holds. With interest rates on the rise, you’re probably wondering if your monthly payments are going to go up and if you’ll be able to afford your home.

At Rate Money, our goal is to provide you with the best possible outcome. We understand the challenges of transitioning from a fixed-rate mortgage, and our Home loan Specialists are here to help make the process as smooth as possible. Contact us today to discuss your options and secure your financial future.

Talk to us today about your home loan needs.