Smart ways to switch from fixed to variable rate loans

Understanding Fixed to Variable Rate Refinancing

When your fixed rate period ending approaches, many Victorian homeowners find themselves wondering whether to stick with their current lender or explore new opportunities. Refinancing from a fixed interest rate to a variable interest rate can provide significant advantages, particularly in changing economic conditions.

A variable interest rate moves up and down with market conditions, which means your loan repayments can fluctuate. While this might seem concerning, it often provides more flexibility and potentially lower costs than remaining locked into another fixed term.

Key Benefits of Switching to Variable Rates

Flexibility in Repayments
Variable rate loans typically allow you to:

• Make additional repayments without penalty
• Access redraw facilities on extra payments
• Change your loan term if your circumstances change
• Take advantage of rate decreases immediately

Access to Loan Features
Most variable rate products come with enhanced features that fixed rates often lack. These include offset accounts, which can significantly reduce the interest you pay over the life of your loan.

Opportunity to Release Equity
Refinancing provides an excellent opportunity for releasing equity in your property. Whether you want to renovate, invest, or release equity to buy the next property, switching to a variable rate loan often provides the flexibility needed for these goals.

When to Consider Making the Switch

Several scenarios make refinancing from fixed to variable particularly attractive:

1. Interest Rate Environment: When market rates are declining or expected to fall
2. Loan Amount Changes: If you need to increase your borrowing
3. Debt Consolidation: Using refinancing to consolidate debts under one loan
4. Property Improvements: Accessing equity for renovations or investments

The Application Process Explained

Refinancing involves a streamlined application process when working with experienced brokers. You'll need to provide:

• Recent banks statements (typically 3-6 months)
• Proof of income
• Details of your current loan
• Information about your financial situation
• Property valuation (arranged by your broker)

Professional mortgage brokers can access loan options from banks and lenders across Australia, ensuring you receive comprehensive market coverage rather than being limited to one institution's products.

Maximising Your Refinancing Outcome

Home Loan Health Check
Before making any decisions, conduct a thorough review of your current position. This includes examining your loan amount, current interest rate, remaining loan term, and financial goals.

Accessing Lower Interest Rates
One primary motivation for refinancing is potentially access a better interest rate than your current loan offers. Even small rate reductions can result in substantial savings over the loan's lifetime.

Reduce Loan Repayments
Switching to a lower rate or extending your loan term can reduce loan repayments, freeing up cash flow for other financial priorities.

Professional Support Makes the Difference

Working with qualified mortgage brokers provides several advantages:

• Access to better loan options across multiple lenders
• Expertise in refinance interest rates and market conditions
• Assistance to check eligibility for special lender policies
• Support throughout the entire application process
• Ongoing relationship for future financial needs

Making Your Decision

Choosing between fixed and variable rates depends on your individual circumstances, risk tolerance, and financial goals. Variable rates offer flexibility and the potential for immediate benefits when rates decrease, while fixed rates provide certainty in repayments.

Consider your current financial situation, future plans, and how comfortable you are with potential repayment changes. Professional advice can help you weigh these factors and determine the most suitable approach.

Refinancing from fixed to variable rates can unlock opportunities for Victorian homeowners, from accessing lower rates to releasing equity for future investments. The key lies in understanding your options and working with professionals who can guide you through the process.

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 might benefit your financial situation.