What Happens When Your Fixed-Rate Home Loan Ends?

When you take out a fixed-rate home loan, you agree to a set interest rate for a certain period of time, typically 1 to 5 years. This can provide peace of mind knowing that your monthly payments will stay the same for the duration of the fixed rate period. However, what happens when your fixed-rate home loan ends?

This article will discuss what happens when your fixed-rate home loan ends and the options available to you. We will also discuss the pros and cons of each option, so you can decide what is best for you.

What is a Fixed-Rate Home Loan?

A fixed-rate home loan is a type of mortgage that has a fixed interest rate for a set period of time, typically 1 to 5 years. This means that your monthly payments will stay the same for the duration of the fixed rate period, regardless of changes in the market interest rates.

Fixed-rate home loans can offer peace of mind, as you know exactly how much you will be paying each month. This can be especially helpful if you are on a tight budget or if you are planning for the future.

However, fixed-rate home loans can also be more expensive than variable rate mortgages. This is because the lender is locking in a lower interest rate for you, and they are taking on more risk.

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What Happens When a Fixed-Rate Home Loan Ends?

When your fixed-rate home loan ends, you will have a few options. You can:

  • Re-fix your loan at a new fixed rate: This will lock in your interest rate for another set period of time.
  • Switch to a variable rate loan: Your interest rate will then be variable, which means it will go up or down depending on market conditions.
  • Split your loan between fixed and variable rates: This is known as a split loan. You can choose to fix your interest rate for a certain period of time, while the rest of your loan will be variable.
  • Refinance your loan with a new lender: This means you will take out a new loan with a different lender. You may be able to get a better interest rate with a new lender, but you will need to pay closing costs.

The best option for you will depend on your individual circumstances and financial goals. Talk to one of our mortgage brokers at Odin Mortgage who can help you decide. 

Pros and Cons of Each Option

Re-fix your loan at a new fixed rate: Pros

  • You will know exactly how much your monthly payments will be for the next few years.
  • You can lock in a lower interest rate, which can save you money in the long run.

Cons

  • You may not be able to get as good of a rate as you did when you first took out your loan.
  • If interest rates fall, you will miss out on the savings.

Switch to a variable rate loan: Pros

  • Your monthly payments may be lower than if you re-fixed your loan.
  • You can benefit from falling interest rates.

Cons

  • Your monthly payments could go up if interest rates rise.
  • You may not be able to budget as easily, as your monthly payments will not be fixed.

Split your loan between fixed and variable rates: Pros

  • You can get the benefits of both fixed and variable rates.
  • You can lock in a lower interest rate for part of your loan, while still benefiting from falling interest rates for the rest of your loan.

Cons

  • This can be more complicated to set up than a fixed-rate or variable-rate loan.
  • You may not be able to get as good of a rate as you would if you had all of your loan on a fixed rate.

Refinance your loan with a new lender: Pros

  • You may be able to get a better interest rate with a new lender.
  • You can change the terms of your loan, such as the length of the loan or the amount of the loan.

Cons

  • You will have to pay closing costs, which can be expensive.
  • Your credit score may need to be good in order to qualify for a refinance.

Is It a Good Time to Move to a Fixed Rate?

Here are some factors to consider when deciding what is best for you when your fixed-rate home loan ends:

  • Your current interest rate: If you are currently on a low fixed rate, you may want to consider re-fixing your loan. However, if your current interest rate is high, you may want to switch to a variable rate or refinance your loan.
  • The current market interest rates: If interest rates are low, you may want to consider switching to a variable rate loan. However, if interest rates are high, you may want to consider re-fixing your loan or refinancing your loan.
  • Your financial situation: If you are on a tight budget, you may want to consider switching to a variable rate loan. However, if you have a good financial cushion, you may want to consider re-fixing your loan or refinancing your loan.
  • Your long-term goals: If you plan on staying in your home for a long time, you may want to consider re-fixing your loan. However, if you plan on moving in the near future, you may want to consider switching to a variable rate loan or refinancing your loan.

Once you have considered these factors, you can start to weigh the pros and cons of each option. It is important to do your research and compare rates from different lenders before making a decision.

Secure a Fixed Home Loan with Odin Mortgage

Odin Mortgage is a mortgage broker that specializes in helping expats and overseas residents get home loans in Australia. We have a team of experts who can help you understand your options and find the best loan for your needs.

If you are looking for a fixed-rate home loan in Australia, Odin Mortgage is a great option. We can help you understand your options and find the best loan for your needs.

Contact us today.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently asked questions

Your monthly payments will typically go up when your fixed-rate home loan ends. This is because your interest rate will no longer be fixed, and it will be based on the current market rate.

The best option for you will depend on your individual circumstances and financial goals. It is important to weigh all of your options and consider your budget, your long-term goals, and the current market interest rates.

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