If you’ve had a fixed rate home loan for the past year or so, you may be feeling worried about your term expiring, especially now that interest rates have risen thanks to the RBA’s cash rate changes. This article focuses on what you can do to prepare for the end of your fixed rate, but to learn about what to expect and the options available to you at the end of a fixed term, read this article instead.
Whether your fixed rate will expire in six weeks or six months, here are some tips to get ready for the change.
What to do now
Review your budget
It’s a good idea to review your household budget regularly, so if you haven’t done it in a while this is your sign to put some time in your schedule to do so. It doesn’t matter whether you like to use a spreadsheet, your bank statements and coloured pens, or the mymo by P&N Bank mobile app, knowing exactly where all your income goes will help you formulate a plan for the future of your home loan.
Review all your expenses and see if there are any savings to be made anywhere in your expenditure. With inflation and the increases in the cost-of-living you may find you’re spending more than expected in one area, but can cut the amount being spent in another.
Make sure you’re not guilty of any of these bad money habits too.
Think about your savings
Interest rates have not just risen on home loans. Positively, the rates of return on savings accounts have also increased, and you should be taking full advantage of them.
Take a look at your savings account(s) and the rates being offered. Is there a bonus interest rate that you’re missing out on currently but could be benefitting from? Do you have enough in your savings account to open a term deposit and maybe earn even more interest?
While earning a little more on your savings may not seem like a big deal in the grand scheme of things, every dollar will help you over time.
Consider extra repayments
While your home loan rate is lower than the current market-average, it could be worthwhile paying more than your minimum repayment amount. By doing so, you’ll be reducing the balance of your loan which could save you money on future interest payments and build you a buffer.
Not all lenders allow extra repayments on fixed rate home loans, so ensure you check your loan details. If you have a P&N Bank Fixed Rate home loan you can make up to $25,000 in extra repayments during the fixed period with no fees or costs.
What to do next
Explore your options
Once you’ve done the above (especially the budget review), you’ll be ready to start looking at your options for when your fixed rate term expires. To be able to explore your options easily, you will find it useful to know your current loan balance, your Loan to Value Ratio (LVR), your current rate and any extra fees or charges you pay on your loan.
First up, you should review the home loan product that your fixed rate loan will “roll-over” to – which is likely a variable rate loan – and then compare it to other home loans available to you. Your LVR will impact which home loan rates you’re eligible for, so bear that in mind when comparing home loans.
Take into consideration features such as offset accounts, flexible repayments and redraw options when comparing different home loans. We know it can be tricky and that’s why we have several calculator tools to help make the process easier for you.
Our home loan comparison calculator lets you see two loans side-by-side, while our home loan repayment calculator will help you get an idea of how much you will need to budget for when you’re faced with a higher interest rate and new repayment amounts. It will also show you how paying extra towards your home loan can make a difference to the interest over the long term.
Seek assistance
Not sure where to start or aren’t confident navigating the often-confusing world of home loans? Don’t panic! Instead, seek some help from an expert.
Reach out to your lender or your broker (if you used one originally) before your term ends to discuss the options available to you. Brokers have access to a wide variety of home loans from many different banks and lenders so be prepared to answer some questions to allow them to match you to available options properly.
Whether your current fixed rate loan is with P&N Bank or not, our home loan specialists are more than happy to review the options available to you. They’ll work with you to find the home loan that is best suited to your future needs, whether that is a variable, fixed rate or split rate loan.
Time to chat?
We’ve made speaking to someone here at P&N about your home loan options, easy. Simply call us on 13 25 77 or complete this form to make an appointment with one of our in-branch, mobile or virtual home loan specialists. Alternatively, contact your broker.
Banking and Credit products issued by Police & Nurses Limited (P&N Bank) ABN 69 087 651 876 AFSL/Australian Credit Licence 240701. Any advice does not take into account your objectives, financial situation or needs. Read the relevant Product Terms and Condition, before acquiring any product in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available on our website or upon request.