A fixed rate term is a prearranged period of time, typically lasting between one and five years, during which you and your lender agree upon a fixed rate for your loan. After the term ends, your loan will usually revert automatically to the standard variable interest rate, unless you instruct your lender to refix your loan. It’s important to talk to your mortgage broker before the end of your fixed rate term to understand what your new interest rate and repayments might be and what your options are.
Repricing with your current lender
If you stay with your current lender, they may not offer you the lowest interest rate that they have available. You can ask for a reprice to a more competitive rate or ask your current lender to match a more competitive rate offered by a different lender.
Refinancing to a different lender
You may also consider refinancing to a different lender once your fixed rate term ends. However, before making this decision, it’s important to understand the “true cost of switching”. Many lenders offer tempting cashback offers or advertise lower rates, but there are several fees and charges involved in setting up a new loan that you need to consider. If your loan-to-value ratio (LVR) is above a certain limit, usually 80% LVR, you may also need to pay Lenders’ Mortgage Insurance.
We can help you understand the actual cost of changing lenders and how much you could save.
