What are the Benefits of Refinancing Fixed to Variable?

When your fixed rate period ending approaches, many Brighton homeowners face an important decision: should they lock in another fixed term or switch to a variable interest rate? Understanding the advantages of moving from fixed to variable rates through refinancing can help you make an informed choice that aligns with your financial situation.

Understanding Variable Interest Rates

Variable interest rates fluctuate with market conditions and Reserve Bank of Australia cash rate movements. Unlike fixed rates that remain unchanged for a set period, variable rates can move up or down, potentially offering opportunities to benefit from rate decreases. This flexibility means your loan repayments may reduce when rates fall, though they can also increase when rates rise.

Key Benefits of Switching to Variable Rates

Payment Flexibility
Variable loans typically offer more flexibility in how you manage repayments. Many lenders allow additional payments without penalties, helping you reduce your loan term and save on interest over time. This feature proves particularly valuable for borrowers whose income has increased since taking their original loan.

Access to Loan Features
Variable rate products often include features not available with fixed loans:
• Offset accounts to reduce interest charges
• Redraw facilities for accessing extra payments
• Interest-only payment options for investment properties
• The ability to split your loan between different rates

Potential Rate Reductions
When market conditions favour borrowers, variable rates can drop below fixed rates, potentially providing immediate savings on your monthly repayments. This advantage becomes particularly relevant during periods of declining interest rates.

When Refinancing Makes Sense

Refinancing from fixed to variable rates often proves beneficial when:

1. Releasing equity in your property - You want to access funds for renovations, investments, or other purposes
2. Consolidate debts - Combining multiple debts into your mortgage at a lower interest rate
3. Accessing a lower interest rate - Current variable rates are below your existing fixed rate
4. Release equity to buy the next property - Funding an investment or upgrading your home

The Application Process

The refinancing application process involves several key steps. Your mortgage broker will help gather necessary documentation including recent bank statements, payslips, and tax returns. This information helps lenders assess your financial situation and determine suitable loan options.

Solara Financial can access loan options from banks and lenders across Australia, ensuring you receive comprehensive market coverage. Our home loan health check service evaluates your current arrangements against available alternatives, potentially identifying opportunities to reduce loan repayments or access additional features.

Considerations Before Switching

While variable rates offer advantages, consider these factors:

Rate Movement Risk
Variable rates can increase, potentially raising your repayments above what you'd pay with a fixed rate. Ensure your budget can accommodate potential rate rises.

Break Costs
Switching from fixed to variable during a fixed term may incur break costs, though these don't apply when your fixed rate period ending occurs naturally.

Loan Amount and Equity
Your current loan amount and available equity affect refinancing options. Higher equity positions often provide access to more competitive refinance interest rates and loan features.

Professional Guidance for Brighton Residents

Choosing between fixed and variable interest rates requires careful consideration of your financial circumstances, risk tolerance, and future plans. Our experienced mortgage broker in Brighton team understands local market conditions and can help evaluate whether switching to variable rates suits your situation.

We check eligibility for special lender policies that might provide additional benefits or rate discounts. Through our streamlined application process, we guide you through each step, from initial assessment to settlement.

Taking Action

If your fixed rate period ending approaches, now is the time to explore your options. Better loan options may be available that could improve your financial position through reduced payments, additional features, or the ability to change your loan term.

Don't wait until your current rate expires to start exploring alternatives. A proactive approach ensures you have time to evaluate all available refinancing options and make an informed decision about your mortgage's future.

Call one of our team or book an appointment at a time that works for you to discuss how refinancing to a variable rate could benefit your financial situation.