When a fixed rate mortgage is coming to the end of the term, your bank will try and determine your new fixed rate (which often is their carded rate) or switch you to a Floating Rate Home Loan. This is great for convenience, but unfortunately it could mean you are missing out on huge savings.
Why refix your home loan?
Most homeowners set their mortgage rate for a fixed term on a rolling basis and do not challenge the lender rates or adapt their mortgage to their changing needs. When you refix your mortgage, you can, and should, take advantage of the market movements and reduce your offered rates.
How do I refix my mortgage?
Finding your lender was hard enough, so why complicate matters now? Many people are unaware that fixed interest rates and fixed repayment periods can be adjusted without changing lenders.
You can refix your mortgage at any time, for most people they do this at the end of their fixed term agreement or in the 60-day period allowed by most banks. If you want to pay off your fixed rate loan before this period or break the fixed term, you may incur a one-off break fee cost.
The fee will vary depending on your current interest rate, loan amount, market conditions and term left in your current agreement. If your mortgage is fixed at a better rate, the interest saved could make the break fee worthwhile and could allow you the opportunity to reduce your loan term if you increase your repayments.
Can I do it myself?
Well, technically yes, but refixing your mortgage can be complicated, time consuming and frustrating which is why we advise that you talk to a mortgage broker. Their understanding of the market means that they not only get you the best mortgage deal to start with, but ensure that the ongoing rates and structure are right for you. If they know that your current lender is not your best option, they will provide you with the option of refinancing. For benefits of refinancing, read our blog on the topic.
Things to consider when refixing
- If you are thinking of selling your house, you may want to go for a shorter fixed term mortgage than before. That way, you will not have to pay the fixed rate when you sell.
- Your income is changing – If you have had a pay rise or bonus, you may want to contribute a lump sum or increase your payments.
- You may have a change in circumstances such as an illness or baby due which will affect the household income. You may want to find the lowest interest rate over the longest period.
- Do you have child care costs that are reducing soon?
- Are you due any bonuses or are you expecting any lump sums?
- Are you planning some renovations to your property?
How to get the best rate
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Just like your initial mortgage, finding a better rate requires a lot of negotiation with your lender. If we think changing lenders is the better option, we’ll even do the shopping around for you to get you the best deal. The time it takes you to research every bank and lending provider could be condensed into a 5- minute email or call and I’ll take it from there.
Some lenders will look at how many products you have with them, and if your income is credited to that account. They will also look at your loan amount.
We’ll make sure you have the best structure for your situation.