Switching from Fixed to Variable: What You Need to Know

Coming Off Fixed Rate? It's Time for a Loan Review

If your fixed rate period ending is on the horizon, you're probably wondering what happens next. Many Morningside homeowners find themselves stuck on high rate mortgages after their fixed term expires, often rolling onto a much higher variable interest rate without realising it.

The good news? You're not locked into whatever rate your current lender offers. Refinancing when coming off fixed rate can open up opportunities to access a lower interest rate, unlock equity, and find loan products with features that work for your lifestyle.

Why Refinance to Variable When Your Fixed Rate Expires?

When your fixed rate expiry arrives, you'll typically revert to your lender's standard variable rate - and this isn't always competitive. Here's what makes switching to variable through a refinance application worth considering:

• Potentially access better interest rates: Other lenders may have more competitive variable interest rate options that could help you save thousands over the life of your loan
• Gain flexibility: Variable rate loans often come with features like a refinance offset account and refinance redraw facilities that weren't available with your fixed loan
• No more restrictions: Fixed loans often limit extra repayments - variable rates give you the freedom to pay off your mortgage faster
• Access equity: A refinance process can help you release equity to buy the next property or fund renovations

Understanding the Refinance Process

The mortgage refinancing journey involves several steps, but knowing what to expect makes it far more manageable:

1. Home loan health check: Start by reviewing your current loan amount, interest rate, and features
2. Compare refinance rates: Look at what other lenders are offering - this is where a mortgage broker can save you hours of research
3. Property valuation: Your lender will assess your property's current value
4. Application: Submit your refinance application with supporting documents
5. Settlement: Once approved, your new loan pays out the old one

The timing matters too. Ideally, you'll want to start the refinance mortgage process about 90 days before your fixed rate period ending to ensure everything's in place when you need it.

When to Refinance: Timing Your Switch

While fixed rate expiry is an obvious trigger, there are other scenarios when refinancing makes sense:

• You're paying too much interest compared to current refinance rates
• You want to consolidate into mortgage to simplify debt management
• You need to access equity for investment purposes or home improvements
• Your financial situation has improved and you can now access a lower interest rate
• You want better features like offset accounts to improve cashflow

The Real Cost of Staying Put

Many Morningside residents don't realise how much staying with their current lender after coming off fixed rate could cost them. Even a difference of 0.5% on a $500,000 loan amount translates to around $2,500 per year in additional interest payments. Over ten years, that's $25,000 you could have saved.

A loan review can reveal if you're one of the many Australians paying too much interest. The difference between what you're paying and what you could be paying might surprise you.

Variable vs Fixed: Making the Right Choice

Switching from fixed to variable isn't the only option when refinancing. You could:

• Switch to variable for complete flexibility and access to features
• Lock in rate again if you prefer certainty and rates are favourable
• Split your loan between both for a balanced approach

The right choice depends on your circumstances, risk tolerance, and financial goals. If interest rates are stable or falling, a variable interest rate gives you the benefit of any decreases. If you value budgeting certainty, you might prefer to lock in rate again.

What About Fees and Costs?

Refinancing does come with costs that you'll need to factor in:

• Application and establishment fees
• Property valuation fees
• Discharge fees from your current lender
• Potential break costs if you're leaving a fixed rate early

However, when you save on interest rate payments, these costs are often recovered within the first year or two. Some lenders also offer cashback incentives that can offset upfront expenses.

Unlocking Your Property's Potential

Refinancing isn't just about reducing loan costs - it's also about releasing equity in your property. If your Morningside home has increased in value since you purchased it, you can access equity through a cash out refinance to:

• Fund home renovations that add value
• Buy an investment property
• Consolidate high-interest debts
• Cover education expenses

This equity release strategy can be a powerful wealth-building tool when used wisely.

Why Work with a Mortgage Broker?

While you can refinance directly with a lender, a mortgage broker has access to numerous lenders and can compare refinance rates across the market. They'll help you:

• Understand why refinance makes sense for your situation
• Navigate loan features like refinance offset account and redraw options
• Complete your refinance application correctly the first time
• Move mortgage providers smoothly without the hassle

For Morningside locals, working with someone who understands the local property market adds another layer of value to the process.

Your Next Steps

Don't wait until the last minute to address your fixed rate expiry. Taking action now means you'll have time to find the right loan, complete the refinance process, and potentially save money on your repayments.

A loan health check is the perfect starting point. It'll show you exactly where your home loan stands and what opportunities exist to improve your situation. Whether you're looking to save thousands on interest, improve cashflow, or unlock equity, understanding your options is the first step.

If you're considering refinancing your home loan or exploring options after coming off your fixed rate, the team at LBK Lending is here to help Morningside homeowners make informed decisions about their mortgages.

Call one of our team or book an appointment at a time that works for you. We'll review your current situation, compare what's available in the market, and help you understand whether refinancing to a variable rate - or any other option - is right for your circumstances.