Refinancing: What to Do When Interest Rates Change

Interest rates don’t stay the same forever.

Whether they’re rising or falling, changes to the interest you pay on your home loan can impact your repayments, and overall financial position. Understanding the options available to you can help stay in control, and decide with confidence when it comes to your home loan.

Fixed-Rate Home Loan: What to Consider

One option some borrowers explore when interest rates are rising is moving to a fixed rate home loan.

A fixed rate can provide repayment certainty, as your interest rate stays the same for an agreed period. This can make budgeting easier and protect against further rate increases during that time.
However, fixed rate loans may come with trade-offs:

• Limits on additional mortgage repayments.
• Reduced access to features like offset accounts or redraw facilities
• Break costs, if you exit your existing loan early.
• You may not benefit if interest rates fall during a fixed period.

Because of this, it’s important to discuss with your MoneyQuest broker to ensure a fixed rate is the right choice for you.

Variable-Rate Home Loan: What to Consider.

Variable rate home loans can increase when interest rates rise, but they often provide more flexibility.

Potential benefits may include:

• Access to offset accounts and redraw facilities.
• Ability to make extra repayments.
• Opportunity to benefit if interest rates decrease.

Depending on your circumstances, some borrowers choose to remain variable or consider a combination (split loan) to balance certainty and flexibility.

Refinancing and Restructuring Your Loan.

Refinancing involves replacing your current loan with a new one, either with your existing lender or a different lender.

This may allow you to:

• Access a more competitive interest rate.
• Change your loan features.
• Adjust your loan term.
• Better align your loan with your current needs.

What to Consider Before Refinancing.

Refinancing usually includes costs and risks, and its important to make sure you are aware of these before you decide to switch rates or lenders.

• Break costs may apply to fixed-rate loans.
• Application, discharge and other fees may apply.
• Lender’s Mortgage Insurance (LMI) may apply in some cases.
• Extending your loan term may increase the total interest paid over time.
• Not all loan features are available across all products.

Managing Your Finances During Rate Change Periods.

There are plenty of practical steps you can take to support yourself when iterest rates climb.

 Build or Maintain Savings.

Higher Interest rates may also increase the return on savings accounts,which can help offset rising costs

Reduce Other Debts.

Paying down personal loans, credit cards or other debts can improve cash flow and reduce overall interest paid.

Be Cautious with Debt Consolidation.

Debt consolidation can help simplify payments, but be aware that spreading debts over a longer repayment term can extend the total interest paid.

Speak to MoneyQuest About Your Options!

No two borrowers are exactly alike, that’s why speaking to your local MoneyQuest broker about your situation is important when it comes to maintaining your financial wellbeing.

We can help you…

• understand the options available to you
• compare finance solutions from over 60 lenders and
• assess whether a refinance loan is suitable based on your circumstances.

Reach out to us and let help you unlock your finance freedom.

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