Navigating the end of a fixed-rate mortgage can be stressful, but with Rate Money by your side, you won’t have to face it alone.
The Reserve Bank of Australia reported that around 880,000 fixed-rate home loans will expire and switch to variable rates in 2023. These loans were taken out during 2021-22 as borrowers sought certainty during COVID-19. This has led to concern for many borrowers, who are now facing the possibility of becoming mortgage prisoners.
Mortgage prisoners are borrowers who are unable to refinance their loans, even if they are up to date with their payments. This can happen if the borrower’s property value has fallen below the amount owing on the loan, or if the borrower’s interest rate has increased to a level that they can no longer afford.
As a result, if you took out fixed-rate loans during the pandemic, you may now be unable to refinance them when your fixed-rate period ends. If you’re approaching a mortgage cliff, take a look at our top five tips to ease the transition.
Rate Money could help. Rather than paying 10.90% (ATO GIC) on your tax debt, Rate Money could consolidate it into a home loan! Unlike most mainstream lenders, this will drastically reduce your interest rate and monthly repayments. Better yet, it will free up cash flow for you to invest back into your business.
5 tips if you are coming off your fixed-rate
Get your property revalued now if you think the value will decrease
If you think your property's value is declining, get it revalued now. This could be the difference between having enough equity to refinance. Banks assess the value of your home based on current comparable sales. Most evaluations last between 90 and 180 days, so you can coincide them with your fixed-rate term ending. Ensure your property is in good condition and make quick cosmetic touch-ups to put it in the best light.
Make extra repayments before your fixed rate ends
Paying off your home loan early can be wise, especially if interest rates are rising. It will allow you to reduce your home loan balance before interest rates rise and save you a significant amount of money in the long run.
For example, if you have a $500,000 loan with an interest rate of 4%, and you make an extra $10,000 in repayments each year, you could save over $20,000 in interest over the life of your loan. At Rate Money, we offer a flexible range of loans that can allow you to make up to $10,000 in extra repayments for your fixed-rate home loan.
In addition to saving money, paying off your home loan early can give you peace of mind. You’ll know that your home is debt-free, and you’ll have more financial flexibility.
Consider moving to an interest-only loan and or consolidating your debts
If you’re experiencing cash flow issues and are struggling to pay down your mortgage, an interest-only loan or consolidating your debts (tax debt, car loans, credit card debts) might be a good solution for the immediate term.
At Rate Money, we provide you with the option to pay interest- only on your owner-occupied property (not just investment properties) for a set period. So while interest rates are high, this could be a great way to reduce your monthly repayments over the next two years. It will free up cash flow and help your financial positioning while alleviating stress.
Consider refinancing to a fixed-rate mortgage
If your fixed-rate mortgage is ending, and you don’t want to face the uncertainty variable interest rates bring, consider refinancing with Rate Money to a fixed-rate mortgage. This way, you can lock in your interest rate so you won’t have to worry about your payments going up with each rate rise.
Talk to a Rate Money Home Loan Specialist
If you’re a self-employed borrower coming off your fixed-rate mortgage, you may be feeling a bit anxious about the future. With interest rates on the rise, you’re probably wondering if your monthly payments will go up and if you’ll be able to afford your home.
At Rate Money, we aim to provide you with the best possible outcome. We understand the challenges of transitioning from a fixed-rate mortgage, and our Home loan Specialists are here to help make the process as smooth as possible. Contact us today to discuss your options and secure your financial future.
