If you're a homeowner with a fixed-rate term mortgage, your term is typically set for a set number of years. When your term is up, you need to decide whether to renew your mortgage or switch to a variable-rate mortgage. Here are some things you can do if you are still unsure of your next step.
1. Refinance
Homeowners may refinance their home loan for several reasons, such as to lower their monthly payments, change from an adjustable-rate mortgage to a fixed-rate mortgage, or take cash out of their equity.
If you're interested in saving money on your mortgage, it may be a good idea to convert your loan to a fixed-rate mortgage in the long run. Although you'll have to pay some fees to do the conversion, it could be worth it if fixed rates stay low.
2. Re-Fix
If your lender offers the option to renew your home loan after the fixed-rate term expires, you may be able to choose another fixed-rate term. This option is typically available on a case-by-case basis. That said, when you refinance your home loan, you may not be eligible for the same promotional offers that are available to new customers. Be sure to compare interest rates to get the best deal possible.
Take note that re-fixing your property may not be the best option if you plan to sell or renovate it in the future.
3. Revert
Your home loan agreement will have special provisions dictating what happens at the end of your fixed-rate term. In most cases, you will automatically be moved to the revert rate, but it's always best to consult your mortgage broker first. To clarify, the revert rate is the interest rate you will pay on your loan if you switch from a fixed interest rate to a variable interest rate. This rate is usually the standard variable rate that the lender offers, but it can be higher than the variable rate by up to one per cent.
If you let your loan revert now, you could still potentially refinance to a better-fixed rate at some point in the future.
What Happens When the Interest Rates Increase after the End of the Fixed Period?
If interest rates have increased by the time your fixed period ends, you may not be able to do much about it. Your best option would be to look for the most competitive interest rates that fit your situation, whether that be with your current lender or a different one. Trying to get the best interest rate possible when you're taking out a loan is essential because even a small difference in rates can add up to a lot of money over time.
Things to Consider before Switching Home Loans
If you're considering switching your home loan, you should first consider whether the benefits will be worth the costs. Taking into account the interest you could save or the advantages of another loan's features, determine if it's the right move for you.
This means you should look at loans from multiple lenders to find the best one. Once you have found some loans that you are interested in, you should compare their interest rates, features, and fees to find the best option.
Conclusion
There are a few things that you can do when your fixed-rate term ends. You can refinance to a new fixed-rate loan, you can refinance to an adjustable-rate mortgage, or you can simply keep your current loan and pay the higher interest rate.
No matter what you decide to do, make sure you do your research and talk to a financial advisor to ensure you're making the best decision for your individual situation.
If you are looking for some of the best refinancing mortgage brokers in Sydney, look no further than our experts here at Wealthy You. We are an Australian Mortgage Company servicing Sydney for almost a decade and because of this, we can offer you a variety of mortgage solutions to meet your specific financial needs. Call us today and let us discuss all your viable mortgage options.
