Switch from Variable to Fixed: When and How to Refinance

Why Bricklayers are Switching from Variable to Fixed Rates

If you've been watching your variable interest rate climb higher over the past while, you're not alone. Many brickies across Australia are feeling the pinch as their mortgage repayments increase with every rate rise. When you're running jobs, managing teams, and dealing with the ups and downs of the building industry, the last thing you need is uncertainty about your home loan repayments.

Switching from a variable to a fixed interest rate through mortgage refinancing gives you certainty. You'll know exactly what you're paying each month, which makes budgeting for your business expenses and personal costs much more straightforward. For tradies who prefer to plan ahead and avoid surprises, a fixed rate period can provide real peace of mind.

Understanding the Refinance Process

Refinancing your home loan to switch from variable to fixed isn't as complicated as you might think. Essentially, you're either negotiating a new rate with your current lender or moving your mortgage to a different lender who can offer you what you're looking for.

The refinance process typically involves:

1. Getting a loan review or home loan health check to see where you stand
2. Comparing refinance rates across different lenders
3. Choosing the loan amount and fixed rate period that suits your situation
4. Submitting a refinance application with required documentation
5. Going through a property valuation
6. Settling your new loan and locking in your rate

For bricklayers, especially those who are self-employed, having your financials in order makes the whole thing run more smoothly. Keep your ABN details, tax returns, and business bank statements handy.

When to Refinance to a Fixed Rate

Timing matters when you're thinking about refinancing. Here are some situations where it makes sense to switch to fixed:

• You're stuck on a high rate: If your current variable interest rate is significantly higher than current refinance rates available in the market, you could save thousands by making the switch
• Interest rates are rising: When you see the Reserve Bank increasing rates regularly, locking in a fixed rate can protect you from further increases
• Your fixed rate period is ending: If you're coming off a fixed rate and reverting to variable, now's the time to compare what's available
• You need certainty: When you've got big expenses coming up - maybe new equipment for the business or school fees - knowing your exact repayment amount helps with cash flow planning
• You want to consolidate debt: You might want to consolidate other debts into your mortgage while also switching to fixed, which can reduce your overall loan costs

The Benefits Beyond Rate Certainty

While the main reason to refinance to a fixed rate is locking in your interest rate, there are other advantages worth considering:

Improved Cash Flow Management: When you know exactly what's coming out of your account each month, you can manage your money more effectively. This is particularly valuable for brickies who might have seasonal fluctuations in work.

Access to Better Features: The refinance application process gives you a chance to look at loans with features you might not currently have, like an offset account or redraw facility. These can help you pay down your loan faster or access funds when you need them.

Release Equity: If you're thinking about expanding your property portfolio or need funds for your business, refinancing lets you access equity in your property. A cash out refinance means you can unlock equity while also securing a fixed rate.

What to Watch Out For

Before you jump into refinancing, there are a few things to keep in mind:

Break Costs: If you're currently on a fixed rate and want to refinance before the fixed rate expiry, you might face break fees. Calculate whether the potential savings outweigh these costs.

Comparison Rate: Don't just look at the advertised interest rate. The comparison rate includes most fees and charges, giving you a clearer picture of what you'll actually pay.

Fixed Rate Period Length: You'll need to decide how long you want to lock in for - typically anywhere from one to five years. Consider where interest rates might be heading and how long you want that certainty.

Flexibility: Fixed rate loans generally offer less flexibility than variable loans. Make sure you understand any restrictions on extra repayments or accessing your redraw facility.

How Much Could You Save?

Let's put some numbers to it. Say you've got a $500,000 loan amount and you're currently paying 6.5% on a variable rate. If you refinance to a fixed rate of 5.8%, that's a difference of around $200 per month or $2,400 per year. Over a three-year fixed period, you'd save over $7,000 - and that's assuming your variable rate doesn't increase further.

These calculations show why so many brickies are looking seriously at mortgage refinancing right now. The potential to save money refinancing and gain certainty makes it worth investigating.

Getting Started with Your Refinance

If you're a bricklayer thinking about refinancing from variable to fixed, the first step is understanding your current position and what's available to you. Look at your existing home loan documents, check what you're currently paying, and think about what you want from your next loan.

At Tradie Home Loans, we work specifically with tradies, so we understand the unique aspects of your income and work situation. We can help you compare current refinance rates, work through the refinance application, and find a solution that fits your circumstances - whether you're looking to access equity, reduce your interest costs, or just get some certainty around your repayments.

Don't let your mortgage sit on autopilot while you're potentially paying too much interest. A quick loan review could reveal opportunities to improve your financial position and protect yourself from future rate increases.

Call one of our team or book an appointment at a time that works for you. We'll have a chat about your situation, look at what's available in the market, and help you work out whether refinancing to a fixed rate makes sense for you and your family.