Switching From a Fixed Rate Loan to a Variable Rate Loan
Im considering Switching From a Fixed Rate Loan to a Variable Rate Loan. Now what?
Refinancing your home loan in Australia is a great way to take advantage of the current market conditions and potentially save thousands of dollars in interest over the life of your loan. One way to do this is by switching from a fixed rate loan to a variable rate loan.
When you first take out a home loan, you have the option to choose between a fixed rate and a variable rate. A fixed rate loan means that the interest rate on your loan will stay the same for a set period of time, usually between 1 and 5 years. A variable rate loan, on the other hand, means that the interest rate can fluctuate based on the Reserve Bank of Australia's (RBA) official cash rate.
If you originally chose a fixed rate loan, but now find that interest rates have dropped, refinancing to a variable rate loan could potentially save you a significant amount of money on interest. This is because a variable rate loan will move with the market, whereas a fixed rate loan will not.
However, it's important to keep in mind that there are also risks associated with a variable rate loan. If interest rates were to rise, your repayments would also increase. That's why it's important to consider your current financial situation, as well as your risk tolerance, before making a decision to refinance.
When refinancing, it's also a good idea to shop around and compare different loan products from different lenders to find the best deal for you. A mortgage broker can help you with this, and can also assist you with the application process.
In summary, refinancing your home loan in order to switch from fixed to variable rate is a great way to take advantage of the current market conditions and potentially save thousands of dollars in interest over the life of your loan. However, it's important to carefully consider your current financial situation and risk tolerance before making a decision, and compare loan products from different lenders to find the best deal for you.
Speak to a mortgage broker today about refinancing to set yourself up to pay off your home faster and avoid paying unnecessary interest.