According to Marion Kohler, Head of Economic Analysis at the Reserve Bank of Australia (RBA), around 800,000 fixed rate mortgages will mature in Australia over the next 12 months. And since the average household size in Australia is 2.59 people, that’s over two million people impacted.
If you’re one of those people whose fixed term home loan is set to expire, you might worry about what this means to you and your family. Particularly in this economy. So, if you’re asking yourself, ‘what happens when your fixed rate mortgage expires?’ Our expert team weighs in.
Before we get down to the nuts and bolts of what to do when your fixed rate home loan expires, let’s explore what will happen when your home loan matures.
Depending on the terms of the mortgage, most Australians will have three options when their fixed rate home loan matures.
If you’re preparing for your fixed rate home loan to expire, there are some steps to take to make the process easier.
This is a great time to take the opportunity to review your home loan with a home loan health check. You’ll know where you are, and can ensure that your current mortgage meets your current and future circumstances. Better, you’ll find out if it doesn’t meet your current needs and be able to take the right steps to remedy that situation.
If your fixed rate term is due to expire in the coming months, it’s a good idea to increase your repayments now. This will help you to steadily build a financial buffer against the shock of increased repayments when your fixed term ends.
Be aware that regardless of the home loan action you choose to take, it’s likely that your repayments will increase at the end of your fixed-rate term. That comes down to the steady increases in the RBA cash rate since a record time period of low rates.
It’s also important to check whether your lending institution has limits in place regarding additional repayments per fixed term year. If they do, it may make taking this step tricky. Instead, you can increase your ‘payments’ but stash the money away into a bank account. That will give you a financial buffer and get you used to paying more on your mortgage in a low risk situation.
If you’re unsure as to whether your fixed rate loan has repayment limits, get in touch. We’d be happy to review the terms of your home loan for you.
The maturation of a fixed rate home loan is an excellent time to consider refinancing. Your home loan health check will review your current mortgage terms and interest rate, as well as your own particular situation. And it will help you understand whether refinancing is a great option for you.
If you decide to explore refinancing, our home loan experts can help you research the best lenders and loan products for your circumstances. We’ll then produce a Customised Proposal Report that includes a list of the best lenders for you, and our recommendation for the most competitive package for your circumstances.
Refinancing is generally a really great option, and not as pricey or time consuming as many Australians believe. Refinancing can help you secure lower home loan repayments at a lower interest rate. And you can find lenders that offer all the features you want (or don’t want). Of course, getting expert advice in comparing home loan products is the most financially prudent way to proceed.
If you do decide to refinance, it’s important to be aware of a few things.
Hopefully we’ve answered the question of ‘what happens when your fixed rate mortgage expires’. So, if you’re one of those whose fixed rate home loan matures in the next 12 months, get in touch.
We can help you with a home loan health check. And we can review your home loan, any investment loans and your budget, to ensure your (current and potential) mortgage best suits your personal circumstances.