Home Loan’s Fixed-Term Ended: What Should You Do Next?

The end of a fixed-rate term on your loan is inevitable. You have to decide what you should do next when this time comes, in other words, when your loan matures. Should you opt for another fixed term? How about a variable rate term? Should you try another lender and refinance your loan? What to expect at the end of maturity term? Should you refix or do nothing? You may feel overwhelmed, but asking these questions help you make the best decision about your personal and financial circumstances. 

If your loan is leading up to the fixed term’s completion, this guide will explain the options you have when your fixed term ends and equip you with good knowledge so you can get yourself a better deal.

But first, you need to understand why doing nothing is not a good idea when your fixed-rate term ends whether you have a variable, fixed, or a split loan.

Why You Should Do Something When a Loan's Fixed-Term Ends?

When your fixed-term ends, your loan reverts to the lender’s standard variable rate. This variable rate tends to be much higher than usual because your lender knows that few borrowers check standard variable rates and switch lenders at this time — and, you as a borrower end up paying loyalty tax. Reverting your loan doesn’t need any additional paperwork or charges. If you read the terms and conditions of your loan, you’ll find how your loan will automatically revert after the end of the fixed term.

And, if you do nothing — your lender takes this opportunity to mess with the interest rate of your loan and you end up paying more than you should. 

Here at NG Loans, our loan experts specialise in fixed-rate loans and help homeowners to get a better deal when maturity term approaches. Book a free consultation with us today and know how to make sure your lender (bank) doesn't overcharge you at the end of your fixed-rate term. 

And, if you want to do something — these are some options you have to get yourself a better deal and secure your financial future.

Refixing Your Loan

If you like the predictability of a fixed loan, you can fix your home loan with your current lender if your current lender allows it. Refixing your loan means you make a new agreement with the same lender to not change the interest rate on your loan for a certain additional period. In return, your lender gives you a fixed interest rate again on your loan and fixed repayments.

You switch your existing home loan to a new term after discussing with your current lender — but you want to make sure you get yourself a competitive interest rate. However, by doing this you are locking yourself into restrictions that come with a fixed-rate loan term — meaning you will have to break costs if you decide to end your loan early. And, you also miss out on opportunities for savings if RBA drops the official cash rate.

You should also bear in mind that refixing does not mean your lender lets you extend your loan term on the existing interest rate or offer you a lower interest rate than before. You may end up paying higher monthly loan repayments if your lender doesn’t offer a competitive interest rate compared to your existing fixed term. You’ll not be able to take advantage of far better loan options offered by other lenders as well. 

Some banks let new customers enjoy special offers that include switching your loan to a newer fixed-rate term after the end of your existing fixed-rate term without paying break costs.

Refixing your home won’t suit you if you have plans to sell your home or do some renovations, or pay off your loan quickly by paying additional repayments or a lump sum amount.

Opt for a Split Loan

You can also choose a split loan after your loan maturity. Your lender divides your loan into two parts — one part of the home loan as a fixed rate and the second part of it as a variable rate. You initially pay a fixed interest rate for agreed years or an agreed amount, then your loan switches to a variable interest rate. 

Choosing a split loan helps you leverage the benefits of both types of loans like having predictable monthly repayments and offset accounts to pay your loan quickly. You could have a split loan in a ratio of 50:50, 60:40, 70:30, or anything in-between.

Switching to a Variable Loan

Another option you have is to switch your loan to a variable interest rate which fluctuates depending on the official RBA cash rate and your lender. Although a variable rate loan lets you take advantage of the official interest rate drops, you still face the continuous risk of high monthly repayments if the official interest rate increases in the future. 

The best thing about switching to a variable interest rate loan is, you get to enjoy additional features such as offset accounts, redraw facilities, additional repayments, and greater flexibility to refinance your loan without paying break costs. 

You can opt for a split loan or a variable loan with your current lender — or — find other lenders that offer you a split loan or a variable rate loan, or even a fixed-rate loan at low rates and better terms. Switching to a new loan type will require additional paperwork and some administration costs so bear that in mind.

Here at NG Loans, we can assist you with some options as we work with a panel of lenders from all over Australia. Talk to our loan experts today and get assistance to identify what type of loan solution fits your needs.

Refinance Your Loan

Refinancing your loan means taking out a new loan to repay your existing loan. Refinancing helps you take advantage of the current economic and financial environment if you took out the previous loan when the economy was not that good. You can refinance your loan to a new split loan, a new variable loan, or a new fixed-rate loan.

Regardless of which type of loan you choose, refinancing enables you to have better interest rates, lower fees, and additional features like an offset account, redraw facility, and additional repayments. On top of that, you can unlock additional home equity that you can use to fund renovations, purchase an investment property, or do debt consolidations. 

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f your fixed-term is ending, this is the best time to consider refinancing. You can refinance your loan with your current lender or find other lenders that are offering better loan options. There’s a huge competitive home loan market currently, so it’s worth checking out new lenders that are willing to offer you the lowest rates and easier terms. You may get charged conversion fees while refinancing your loan, however, this upfront cost could save you thousands over the complete term of your loan.

Here at NG Loans, our mortgage brokers are experts at helping you weigh up the pros and cons of each solution after your loan’s fixed-term ends. Book a free consultation with us today and know what you should do next.