Refinance to Variable or Stay on Fixed

Your fixed rate period ending means you're about to roll onto your lender's standard variable rate, and that revert rate is usually higher than what you locked in a few years back.

Most borrowers coming off fixed rate in Terrigal right now are seeing their repayments jump anywhere from $300 to $800 a month depending on their loan amount and what rate they originally fixed at. If you're sitting on a 2.19% fixed rate from a couple of years ago and you're about to revert to 6.5% or higher, that's a genuine hit to your cashflow. Refinancing to a lower variable rate with a different lender, or even staying with your current lender on a discounted variable product, can bring that repayment back down.

Why Refinance When Your Fixed Rate Ends

Refinancing lets you move to a variable interest rate that's lower than your lender's revert rate. When your fixed term expires, your loan automatically shifts to the standard variable rate your lender sets for existing customers. That rate is almost always higher than the advertised rates they're offering to new borrowers. Refinancing puts you back in the market as a new customer, which means you can access those lower advertised rates. You also get the chance to add features like an offset account or redraw facility if your fixed loan didn't include them.

Consider someone in Terrigal Hills with $550,000 still owing on their mortgage. They fixed at 2.39% three years ago and they're about to revert to 6.7%. Their repayments are going from around $2,400 a month to nearly $3,700. By refinancing to a variable rate of 6.1% with a new lender, their repayments drop to around $3,350. That's a saving of roughly $350 a month, and they pick up an offset account they didn't have before. Over the course of a year, that's over $4,000 staying in their pocket instead of going to the bank.

When Staying Put Makes More Sense

Staying with your current lender on their standard variable rate makes sense if you're planning to pay the loan down quickly or if you're only a few years from paying it off entirely. Refinancing involves application fees, valuation costs, and sometimes discharge fees from your current lender. If your loan balance is under $200,000 or you're planning to throw extra repayments at it and clear it within two to three years, the upfront cost of refinancing might outweigh the interest you'd save. You're also better off staying if your property value has dropped and you're no longer sitting on the 20% equity most lenders want to see when you refinance.

What the Refinance Application Actually Involves

The refinance process starts with a loan health check to see what rate you're currently on, what you're reverting to, and what's available in the market. We pull your current loan statement, check your property value, and run your income and expenses through the new lender's serviceability calculator. You'll need to provide payslips, tax returns if you're self-employed, and recent bank statements showing your living expenses. The new lender orders a valuation on your property, which usually costs between $200 and $400 depending on where you are in Terrigal or the surrounding area. Once the loan is approved, settlement takes another two to four weeks. From start to finish, you're looking at four to six weeks if everything moves smoothly.

In our experience, most people underestimate how much their living expenses have changed since they first took out their mortgage. Lenders now apply much tighter serviceability buffers than they did a few years ago, so even if you've been making your repayments without any trouble, you might not qualify for the same loan amount you originally borrowed. That's where having someone run the numbers before you apply makes a difference.

Offset Accounts and Why They Matter When You Switch

An offset account is a transaction account linked to your home loan where the balance offsets the interest you're charged. If you have $30,000 sitting in your offset and you owe $500,000 on your mortgage, you only pay interest on $470,000. Most fixed rate loans don't include offset accounts, so switching to variable through a refinance gives you access to one if your new lender offers it. For someone earning a decent income in Terrigal, especially if you're a couple with two incomes flowing into the one account, an offset can save you thousands in interest every year without you having to do anything beyond banking your salary into it.

Terrigal has a high proportion of self-employed tradies, hospitality workers, and small business owners who deal with irregular income. If that's you, an offset account gives you somewhere to park income between jobs or during quiet months without locking it away as an extra repayment you can't access. You still get the interest saving, but you've got full access to your cash if work dries up or you need to cover an unexpected cost.

What Happens If You Do Nothing

If you don't refinance and you don't call your current lender to negotiate, you'll stay on their revert rate until you take action. That rate won't come down on its own. Your lender has no obligation to move you to a lower rate just because your fixed term ended. You'll keep paying the higher rate month after month, and over a year or two, that adds up. For a $500,000 loan, the difference between a 6.7% revert rate and a 6.1% variable rate is around $3,000 a year in interest. Over five years, that's $15,000 you didn't need to pay.

Some lenders will negotiate if you call them and ask for a lower rate, but you're still negotiating as an existing customer, and they know you're less likely to leave than someone shopping around. Refinancing gives you the leverage of being a new customer somewhere else, and that's usually where the lower rates are.

Fixed Rate Break Costs and Why They Don't Apply Now

If your fixed rate period has already ended, there are no break costs. Break costs only apply if you refinance or pay out your loan before the fixed term finishes. Once your fixed term expires, you're free to refinance or switch lenders without any penalty. If you're still a few months away from your fixed rate expiry, you can start the refinance process now and time settlement for the day after your fixed term ends. That way you're ready to move as soon as the door opens and you don't spend any time on the revert rate.

Anyone in Terrigal who's still locked into a fixed rate and wants to leave early needs to check their break costs with their current lender before they do anything. Those costs can run into the tens of thousands if rates have moved the wrong way since you fixed. We've seen break costs higher than the total interest saving someone would get from refinancing, which means staying put and waiting it out is sometimes the only option that makes sense financially.

Releasing Equity When You Refinance

Refinancing also gives you the chance to access equity if you've built up more than 20% in your property. Equity release means borrowing against the value your property has gained since you bought it. If you purchased in North Terrigal five years ago and your property value has climbed, you might be sitting on $100,000 or more in usable equity. You can release that equity when you refinance and use it as a deposit on an investment property, to renovate, or to consolidate other debts like car loans or credit cards into your mortgage at a lower interest rate.

For someone looking to buy an investment property on the Central Coast, using equity from their Terrigal home means they don't need to save a separate deposit. The refinance and the equity release happen in the one transaction, and you walk away with a new lower rate on your existing mortgage plus access to cash for the next purchase. Just keep in mind that releasing equity increases your loan amount, which means higher repayments and more interest over time.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers on what you're currently paying, what you'd pay if you refinanced, and whether switching to variable makes sense for your situation. No need to wait until your fixed rate officially ends to have the conversation.

Frequently Asked Questions