When your fixed rate period ending approaches, you might wonder whether switching to a variable interest rate could improve your financial situation. For Surry Hills homeowners, refinancing from fixed to variable rates presents an opportunity to potentially access a lower interest rate and more flexible loan features.
Understanding Fixed vs Variable Interest Rates
A fixed interest rate remains unchanged for a predetermined period, typically one to five years. This provides certainty with your loan repayments but limits flexibility. Once this period expires, your loan automatically converts to your lender's standard variable rate, which may be higher than current market offerings.
Variable interest rates fluctuate with market conditions and your lender's discretionary changes. While this means your repayments can increase or decrease, variable loans often offer features like offset accounts, redraw facilities, and the ability to make additional repayments.
Benefits of Switching to Variable Rates
Refinancing to a variable rate can provide several advantages:
• Potentially access a lower interest rate than your current lender's standard variable rate
• Access loan options from banks and lenders across Australia rather than being limited to your existing lender
• Change your loan term to reduce monthly payments or pay off your mortgage sooner
• Consolidate debts by combining multiple loans into one manageable payment
• Release equity to buy the next property for investment or upgrading your home
• Reduce loan repayments through accessing more competitive refinance interest rates
When Refinancing Makes Sense
Consider refinancing when:
- Your fixed rate period ending coincides with higher standard variable rates
- You want to access loan features not available with your current lender
- Your financial situation has improved, potentially qualifying you for superior loan options
- You're releasing equity in your property for renovations or investments
- Market conditions favour variable rates over fixed rates
The Application Process
Refinancing involves a streamlined application process when working with experienced mortgage brokers. You'll need to provide:
• Recent banks statements and payslips
• Property valuation documentation
• Details of your current loan amount and remaining term
• Information about any changes to your financial situation since your original loan
Mortgage brokers can check eligibility for special lender policies and access wholesale rates not available to direct applicants. This comprehensive approach ensures you're presented with loan options that align with your specific circumstances.
Conducting a Home Loan Health Check
A home loan health check involves reviewing your current loan against available market options. This process examines:
• Current interest rates versus market offerings
• Loan features you're utilising or could benefit from
• Changes in your financial situation that might qualify you for improved terms
• Opportunities for debt consolidation or equity release
For Surry Hills residents, property values and local market conditions can significantly impact refinancing opportunities. Professional mortgage brokers understand these nuances and can identify suitable options.
Potential Costs and Considerations
While refinancing can provide financial benefits, consider associated costs:
• Discharge fees from your current lender
• Application fees for your new loan
• Valuation and legal costs
• Lenders mortgage insurance if borrowing above 80% of property value
Calculate whether the potential savings from accessing a lower interest rate outweigh these upfront costs. Professional mortgage brokers can perform this analysis and recommend whether refinancing suits your situation.
Working with Mortgage Brokers
Mortgage brokers provide access to multiple lenders and can negotiate terms on your behalf. They understand various lender policies and can match your circumstances with appropriate loan products. This is particularly valuable when transitioning from fixed to variable rates, as different lenders offer varying features and pricing.
For Surry Hills homeowners, local mortgage brokers understand regional property markets and can identify lenders who view the area favourably. This knowledge can translate into more competitive offers and smoother approval processes.
Refinancing from a fixed to variable interest rate requires careful consideration of your financial goals, current market conditions, and available loan options. Professional guidance ensures you make informed decisions that support your long-term financial objectives.
Call one of our team or book an appointment at a time that works for you to discuss your refinancing options and discover how switching to a variable rate could benefit your financial position.
