Wondering what will happen after your fixed interest rate period ends? With many fixed interest rate periods ending this year, you’re not alone.
As a mortgage broker, it’s important to provide clients with comprehensive advice and guidance, especially when it comes to managing their home loan repayments. The end of a fixed interest rate period can bring significant changes to your financial planning, but there are several strategies you can employ to prepare effectively.
First, let’s clarify what a fixed rate loan is. It’s a type of home loan where your interest rate remains constant for a predetermined period. Once this period ends, the loan usually shifts to a variable interest rate, or you might have the option to re-fix the rate.
Here’s what you should consider when your fixed interest rate period is nearing its end:
Consult with a Professional: It’s crucial to understand your loan’s structure and the implications of shifting from a fixed to a variable rate. As a mortgage broker, I can help you navigate this transition and explore your options. Consider a Split Loan: This option allows you to enjoy the benefits of both fixed and variable rates by splitting your loan into two parts. This can provide both security and flexibility.Explore Offset Accounts and Redraw Facilities: Depending on your loan type, these features can significantly reduce the interest you pay, either by offsetting your loan balance with the funds in a linked account or allowing you to redraw on extra repayments.Adjust Repayment Frequency: Switching from monthly to fortnightly or weekly repayments can help you pay off your loan faster and save on interest, as you end up making more payments annually. Review Your Repayment Amount: If you’re paying more than the minimum, consider adjusting to the minimum amount to improve your cash flow. Build a Financial Buffer: Having extra savings can provide peace of mind as your fixed rate period ends. Prioritise saving a little more during this period. Be Cautious with Rate Comparisons: When looking for better rates with other banks, ensure you’re comparing similar loan terms. Extending your loan term might reduce immediate expenses but could increase the total interest paid over the loan’s lifetime.Consider Interest-Only Repayments: This can lower your minimum repayments for a period by paying only the interest and not the principal. However, it also means you’re not reducing the loan balance, potentially leading to higher costs in the long term.Evaluate Another Fixed-Rate Term: If you prefer the predictability of fixed repayments, consider re-fixing your loan for another term.
Remember, as your mortgage broker, I’m here to help you navigate these options and find the best solution for your unique financial situation.
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