Why Refinance from Fixed to Variable?
Refinancing from a fixed rate to a variable rate gives you access to features like offset accounts and redraw facilities, and often brings your repayments down if rates have dropped since you locked in. Many Traralgon homeowners who fixed during the pandemic are now coming off those terms and finding their fixed rate sits higher than current variable offerings.
Variable rates also give you the flexibility to make extra repayments without penalty, which can reduce the total interest you pay over the life of the loan. If your fixed term is ending soon or if you're already paying a revert rate that's significantly higher than what's available elsewhere, a refinance application might save you several hundred dollars a month.
What Happens When Your Fixed Rate Period Ends?
When your fixed rate period ends, your loan automatically moves to your lender's standard variable rate unless you take action. That revert rate is often higher than the variable rates offered to new customers, which means you could be paying more than necessary without realising it.
Consider a homeowner in Traralgon who fixed at 2.5% three years ago on a loan of $400,000. When that term expires, the lender's revert rate might be 6.8%, while new variable customers are being offered 6.2%. On a $400,000 loan, the difference between 6.8% and 6.2% is roughly $200 per month. Over a year, that's $2,400 in avoidable interest. This scenario plays out regularly across the Latrobe Valley, where many borrowers fixed during the low-rate window and are now facing expiry.
Checking What Rate You're Currently Paying
Log into your lender's online portal or check your most recent loan statement to confirm your current interest rate and whether your fixed term has expired. If you're unsure, call your lender directly and ask for your current rate, your loan balance, and your remaining fixed term if applicable.
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Once you know where you stand, you can compare that rate to what's currently available. A home loan health check will show you whether refinancing makes sense based on your loan amount, how long you've held the loan, and what you're paying now.
Understanding the Refinance Process
The refinance process involves submitting a new loan application, undergoing a property valuation, and having the new lender pay out your existing loan once approved. You'll need to provide proof of income, recent bank statements, and details of your current mortgage. The new lender will assess your borrowing capacity and confirm the property's value before offering you a loan.
Most refinances take three to six weeks from application to settlement, depending on how quickly you provide documents and whether the valuation comes back in line with expectations. If you're refinancing with the same lender, the process can sometimes move more quickly because they already hold your loan details.
What It Costs to Switch Before Your Fixed Term Ends
Breaking a fixed rate loan before the term expires usually triggers break costs, which can run into thousands of dollars depending on how much time remains and how far rates have moved since you locked in. Lenders calculate break costs based on the difference between your fixed rate and the wholesale rate they can currently get for the remaining term.
If you're only a few months away from the end of your fixed term, it often makes sense to wait rather than pay the break fee. If you're 18 months out and the potential savings are significant, you'll need to weigh the break cost against the monthly saving. In our experience, most borrowers coming off a fixed rate are already at or near expiry, which means no break costs apply.
Accessing an Offset Account Through Refinancing
Variable rate loans commonly include offset accounts, which let you park your savings in a transaction account linked to your mortgage. Every dollar in the offset reduces the balance on which interest is calculated, which can save you thousands over the life of the loan without locking your cash away.
Traralgon homeowners with variable income streams, such as those working in seasonal industries around the Latrobe Valley, often benefit from the flexibility an offset provides. You can build up a buffer during strong months and draw it down when income dips, all while reducing your interest bill. Fixed rate loans rarely include this feature, which is one of the main reasons borrowers choose to refinance their home loan when the fixed term ends.
How Redraw Facilities Work on Variable Loans
A redraw facility lets you access any extra repayments you've made above the minimum. If you've paid an additional $10,000 into your loan over two years, you can redraw that amount if you need it for renovations, a car, or an emergency.
Redraw differs from an offset because the money sits inside the loan rather than in a separate account. Some lenders limit how often you can redraw or charge a fee per transaction, so it's worth checking the terms before assuming full access. Variable loans typically offer redraw as standard, while fixed loans either don't allow it or restrict it heavily.
When Refinancing Doesn't Make Sense
Refinancing involves upfront costs such as application fees, valuation fees, and sometimes legal fees. If your remaining loan balance is small or you're planning to sell the property within the next year, the cost of refinancing might outweigh the interest saving.
Similarly, if your current loan already sits close to the lowest variable rate available and includes the features you need, switching lenders just to shave off 0.1% might not justify the effort. A loan review will show you the numbers based on your specific situation, so you're not guessing whether the move makes sense.
Releasing Equity During a Refinance
If your property has increased in value since you took out the original loan, refinancing gives you the opportunity to access that equity. This is common among Traralgon residents looking to fund an investment property, renovate, or consolidate other debts into the mortgage at a lower interest rate.
As an example, a borrower with a property valued at $500,000 and a remaining loan of $300,000 has $200,000 in equity. Lenders will typically let you borrow up to 80% of the property value without paying lenders mortgage insurance, which in this case would be $400,000. That leaves $100,000 available to access while keeping the loan at 80% of the property's value. The refinance application process includes a property valuation to confirm the current value before any equity release is approved.
Applying for a Refinance in Traralgon
Traralgon's housing market includes a mix of established homes near the CBD, newer developments around Stockdale and Tyers, and rural properties on the outskirts. Lenders will assess the property type and location as part of the valuation, and some postcodes or property types attract different lending criteria.
If you own a unit in a small complex or a property on a larger block, the lender may require additional information or adjust the loan-to-value ratio they're willing to offer. Working with a mortgage broker in Traralgon means the application is tailored to the local market and the lender is chosen based on how they assess properties in the area.
Getting your paperwork together early speeds up the process. You'll need recent payslips or tax returns if you're self-employed, bank statements covering the last three months, and details of your current mortgage including the account number and outstanding balance. The more complete your application, the fewer delays you'll hit during assessment.
Choosing Between Lenders When You Refinance
Not all variable rate loans are the same. Some lenders offer lower headline rates but charge higher ongoing fees, while others include offset accounts and redraw at no extra cost. You'll also find differences in how lenders assess income, particularly if you're self-employed or earn part of your income through overtime or commission.
Comparing loan features alongside the interest rate gives you a clearer picture of what you're actually getting. A loan with a slightly higher rate but no monthly account fees and a full offset might cost you less over time than a loan with a rock-bottom rate and limited features. This is where a broker can shortlist lenders based on your priorities rather than just the advertised rate.
Call one of our team or book an appointment at a time that works for you to discuss your refinance options and get a clear view of what's available based on your circumstances.
Frequently Asked Questions
What happens if I don't refinance when my fixed rate ends?
Your loan will automatically move to your lender's standard variable rate, which is often higher than the variable rates offered to new customers. This can increase your repayments significantly without you taking any action.
How long does it take to refinance from a fixed rate to a variable rate?
Most refinances take three to six weeks from application to settlement. The timeline depends on how quickly you provide documents and whether the property valuation aligns with the lender's expectations.
Can I access equity when I refinance to a variable rate?
Yes, if your property has increased in value since you took out the original loan, you can access equity during the refinance. Lenders typically allow you to borrow up to 80% of the property's current value without paying lenders mortgage insurance.
What fees are involved in refinancing from fixed to variable?
Common fees include application fees, property valuation fees, and sometimes legal fees. If you're breaking a fixed rate loan before the term ends, you may also face break costs, which can be substantial depending on the remaining term.
Do I need to use a broker to refinance my home loan?
No, you can apply directly with a lender. However, a broker can compare multiple lenders, identify loans that suit your situation, and handle the application process on your behalf, which often saves time and ensures you're getting a competitive rate.
