How to Refinance from Variable to Fixed Rate

Understanding the Switch from Variable to Fixed Rate

If you're currently on a variable interest rate and watching the market with concern, you're not alone. Many homeowners in Elanora are considering whether now's the right time to lock in a rate through refinancing. The good news? You have options, and understanding when to refinance can potentially save you thousands over the life of your loan.

A variable interest rate moves up and down with market conditions, which means your mortgage repayments can change. On the other hand, a fixed interest rate stays the same for a set period - typically between one and five years. This gives you certainty and helps you plan your household budget without worrying about rate rises.

Why Refinance to Switch to Fixed?

There are several compelling reasons why homeowners choose to refinance from variable to fixed:

• Budget certainty: Knowing exactly what your repayments will be makes financial planning much more straightforward
• Protection from rate increases: If you believe rates might rise, locking in can protect you from paying too much interest
• Peace of mind: No more checking the news wondering if your repayments are about to jump
• Improved cashflow management: Fixed repayments make it easier to manage other financial commitments

The refinance process involves moving your existing home loan to a new loan product, either with your current lender or a different one. While you're refinancing, it's also worth considering whether there are other loan features you'd like to access, such as a refinance offset account or refinance redraw facility.

When to Refinance Your Mortgage

Timing matters when you're thinking about mortgage refinancing. Here are some scenarios where switching to fixed might make sense:

You're stuck on a high rate: If you've been on the same variable rate for years, you might be paying more than necessary. A loan review can reveal if there's a better rate available with another lender.

Market conditions are favourable: When fixed rates are particularly attractive compared to variable rates, it could be an opportune moment to make the switch.

You want certainty: Life changes like starting a family, changing careers, or planning for retirement often mean you want more predictability in your finances.

Your fixed rate period is ending: If you're coming off a fixed rate and facing a revert to a higher variable rate, now's the time to compare refinance rates and potentially access a lower interest rate.

The Refinance Application Process

Understanding the refinance process helps you prepare. Here's what typically happens:

1. Property valuation: Your lender will need to assess your property's current value
2. Loan review: We'll look at your current loan amount and circumstances
3. Documentation: Gather your ID, income proof, and current loan statements
4. Application submission: Submit your refinance application to the chosen lender
5. Approval and settlement: Once approved, your new loan settles and replaces your old one

At Living Home Loans, we work with clients throughout Elanora and surrounding areas to manage this process. Our local knowledge means we understand the property market in your area and can help with getting an accurate property valuation.

Comparing Your Options

Before you commit to refinancing, it's worth doing a home loan health check to understand all your options. This involves:

• Comparing current refinance rates across different lenders
• Looking at the loan features you'll gain or lose
• Calculating potential savings on interest rates over different fixed rate periods
• Considering whether you want to access equity or consolidate into your mortgage
• Understanding any exit fees from your current loan versus potential savings

Some homeowners also use refinancing as an opportunity to release equity in their property. Whether you're looking to access equity for investment, renovate, or consolidate debts, refinancing can help you unlock equity while also securing a fixed rate.

Fixed Rate Considerations

While a fixed interest rate offers stability, there are some things to keep in mind:

Limited flexibility: Fixed rate loans often have restrictions on extra repayments. If you like paying more when you can, check what limits apply.

Break costs: If you need to exit a fixed rate loan early, there may be significant costs involved.

Fixed rate expiry: When your fixed rate period ends, you'll typically revert to a variable rate unless you take action. That's why having a plan for when your fixed rate period is ending is important.

Feature limitations: Some fixed rate loans don't include offset accounts or redraw facilities, which could affect your strategy to reduce loan costs.

How Much Can You Save?

The potential to save money refinancing depends on several factors:

• The difference between your current rate and available refinance interest rates
• Your remaining loan amount
• How long you plan to keep the loan
• The costs associated with refinancing versus staying put

Even a difference of 0.25% to 0.50% can mean saving thousands over the life of your loan. For example, on a $500,000 loan, a 0.50% rate reduction could save you over $2,500 per year in interest.

Getting Started with Your Refinance

If you're thinking about refinancing to move from variable to fixed, the first step is getting clear advice tailored to your situation. Every homeowner's circumstances are different, and what works for your neighbour might not be right for you.

Living Home Loans specialises in helping local residents understand their options. Whether you want to switch to fixed, access a lower interest rate, or improve your loan features, we can guide you through the refinance application and help you find a solution that fits your goals.

A refinance mortgage doesn't have to be complicated. With the right support, you can move mortgage products and lock in a rate that gives you confidence about your financial future.

Take Action on Your Home Loan Refinance

Don't wait until rates move again before reviewing your options. If you're in Elanora or nearby areas and you're wondering whether refinancing is right for you, let's have a conversation.

Call one of our team or book an appointment at a time that works for you. We'll conduct a thorough review of your current situation, explain the refinance process clearly, and help you understand whether accessing a lower interest rate through refinancing makes sense for your circumstances. Let's chat about how we can help you take control of your mortgage.