You have two alternatives when your fixed-rate interest period ends: re-fix or convert to a variable rate. Examine your existing situation, future financial goals, and current market trends before making a decision. Most lenders provide fixed-rate terms ranging from one to five years, guaranteeing the interest rate you’ll pay for that time period. Because you chose a fixed-rate term when you first locked in your interest rate, your lender will only contact you with a new offer at the conclusion of the term. You can re-fix your mortgage for up to 5 years with this deal, or your home loan will automatically convert to a variable rate.
1.) Refix your current home loan
If your lender allows it, you can choose to refix your home loan when your fixed-rate period ends. The highest amount of time you can mend for is typically five years. It’s essential to keep in mind that if interest rates decline, you might lose out on thousands of dollars in savings. If you plan to sell or modify your home, or if you plan to make a lot of extra payments, fixing is usually not the best option.
2.) Convert to a variable rate
Your interest rate will normally revert to whatever the lender’s standard variable rate is. As a result, you should contact your lender if this occurs, as the standard rate may be far higher than the market’s reduced rates. You can refinance at a later date, which is typically an excellent alternative if interest rates continue to fall. It pays to always read the fine print of your home loan.
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