Smart ways to switch from fixed to variable rates

When your fixed rate period ending approaches, you're faced with an important decision. Many Australian Defence Force members find themselves wondering whether to stick with another fixed term or make the switch to a variable interest rate. The choice you make could significantly impact your financial situation for years to come.

As Defence Force personnel, you have unique circumstances that civilian mortgage brokers might not fully understand. Your deployment schedules, posting relocations, and specialised income structures require expertise from someone who knows the Defence industry inside out.

Understanding Your Options When Fixed Rates End

When your current fixed rate period ending arrives, your lender will typically move you to their standard variable rate. However, this isn't necessarily your optimal choice. You have several paths forward:

• Stay with your current lender on their standard variable rate
• Negotiate a new fixed rate with your existing lender
• Switch to a variable rate with your current lender
• Refinance to a new lender with different loan options

Each option carries different implications for your loan amount, repayment schedule, and long-term financial goals.

Why Consider Variable Rates?

Variable interest rates offer flexibility that fixed rates simply cannot match. Unlike fixed loans, variable rates allow you to:

1. Make additional repayments without penalty restrictions
2. Access offset accounts to reduce interest charges
3. Redraw facilities for unexpected expenses during deployments
4. Benefit from rate cuts when the Reserve Bank reduces interest rates

The Refinancing Process for Defence Members

The application process for refinancing doesn't have to be overwhelming. When working with specialists who understand Defence careers, the streamlined application process can accommodate your unique circumstances.

You'll typically need to provide:

• Recent banks statements showing your income and expenses
• Pay slips or Defence pay statements
• Details of your current home loan
• Information about your property's current value

Having access loan options from banks and lenders across Australia means you're not limited to mainstream products that might not suit Defence lifestyles.

Reasons to Consider Refinancing

Refinancing isn't just about accessing a lower interest rate, though that's certainly important. Defence members often refinance to:

Release equity in your property - Whether you're looking to release equity to buy the next property or fund major expenses, refinancing can unlock your property's value.

Change your loan term - Adjusting your loan period can reduce loan repayments or help you pay off your mortgage sooner.

Consolidate debts - Combining multiple debts into your home loan can streamline your finances and potentially reduce overall interest costs.

Access enhanced features - Modern home loans offer features like offset accounts and redraw facilities that older loans might lack.

Defence-Specific Considerations

Your military career brings unique advantages when refinancing. Many lenders offer special policies for Defence personnel, recognising the job security and structured nature of military careers. However, not all brokers know how to check eligibility for special lender policies available to serving and former Defence members.

Factors that work in your favour include:

• Stable employment with regular income
• Government-backed job security
• Structured career progression
• Access to Defence-specific lending programs

Conducting Your Home Loan Health Check

Before making any decisions, it's worth conducting a thorough home loan health check. This involves reviewing:

1. Current refinance interest rates compared to what you're paying
2. Loan features you're using versus what's available
3. Fees and charges that might be eating into your savings
4. Your changing financial needs since you first took out the loan

The mortgage landscape has evolved significantly, and you might find better loan options than what was available when you first bought your property.

Making the Switch

Switching from fixed to variable rates through refinancing gives you the opportunity to reassess your entire lending arrangement. You're not just changing rate types - you're potentially accessing a better interest rate, improved loan features, and terms that align with your current circumstances.

Consider your future plans carefully. If you're planning to upgrade your property, invest in real estate, or make significant life changes, the flexibility of a variable rate combined with the right loan features could support these goals.

The key is working with professionals who understand both the lending landscape and the unique aspects of Defence careers. They can help you weigh the pros and cons based on your specific situation, ensuring you make an informed decision that serves your long-term interests.

Your fixed rate period ending doesn't have to mean settling for whatever your current lender offers. Take this opportunity to explore what's available and ensure your home loan continues to work for you, not against you.

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