Many Australian homeowners are facing the prospect of their fixed-rate home loan terms ending. When these fixed loan terms expire, many borrowers will be faced with significantly higher repayments if they allow their home loans to revert to their lender’s standard variable rate. This impending steep change in repayments is commonly referred to as the ‘mortgage cliff’.
Increase in repayments may be substantial and could place significant financial pressure on homeowners who are not prepared for it.
How Can Homeowners Prepare for the Mortgage Cliff?
Calculate the difference in repayments: determine how much your mortgage repayments are likely to increase by if your loan was to revert to your lender’s standard variable rate. This will give you an idea of what you need to budget for andwill help you to determine whether you need to make any financial adjustments.
Refinance your home loan: Consider talking to your mortgage broker about refinancing your home loan –that is, changing your loan to a different fixed-rate product, a different variable rate product, or changing lenders altogether. You may be able to secure a more competitive interest rate than your lender’s standard variable rate andfind the security and/or flexibility that you desire.
Make other financial adjustments: If you’re not able to refinance, you may need to make other financial adjustments to accommodate for the increase in your mortgage repayments. This could include reducing your spending on non-essential items, increasing your income through a second job orside hustle, or reducing your debt.
Work with a mortgage broker: A mortgage broker can be an invaluable resource in helping you survive the mortgage cliff. They can help you understand your options, compare mortgage deals, and negotiate with lenders on your behalf. To ensure you’re prepared, we recommend you reach out to your mortgage broker several months before your fixed-rate term is due to expire. If you don't have a broker, you can contact us
How A Mortgage Broker Can Help Navigate the Mortgage Cliff?
Working with amortgage broker can be incredibly helpful for homeowners who are approaching a mortgage cliff. Mortgage brokers specialise in helping individuals find the right home loan for their needs andcan educate clients about their options. Mortgage brokers provide:
Expertise and knowledge: Mortgage brokers have an in-depth knowledge of the mortgage market and are up to date on the latest mortgage deals and interest rates. They can help you understand your options and find the right mortgage to suit your needs.
Access to a wide range of lenders and products: Mortgage brokers have access to a wide range of loan options from different lenders, as opposed to lenders who can only offer their own institution’s products. This means that mortgage brokers offer more choice and increase your chances of finding a deal that is right for you.
Negotiating power: A mortgage broker has the experience and expertise to negotiate with lenders on your behalf. They can help to secure an interest rate that better suits your circumstances, fight for more favourable terms and lower fees, and potentially save you money over the life of your mortgage.
Simplified process: Mortgage brokers simplify the home loan application process. They handle all the paperwork and negotiations for you, saving you time and effort.
The mortgage cliff is a significant event for many homeowners in Australia and it’s important to be prepared for it. So whether you’re facing the mortgage cliff or simply looking for an interest rate that better suits your needs, we’rehere to help.
Do you need to know more? Contact us or book a free online meeting here
