Switching from Fixed to Variable: Your Refinance Guide

Why Refinance When Your Fixed Rate Period Ends

When your fixed rate period expires, your home loan typically rolls onto your lender's standard variable rate. That standard rate is often significantly higher than what new borrowers are offered, which means you could be paying hundreds of dollars more each month than necessary. Refinancing at this point allows you to reassess your loan structure and potentially access a lower interest rate, whether you choose another fixed period or switch to variable.

Many South Perth homeowners who took out fixed loans several years ago are now facing this decision. Properties in areas around the foreshore and along Angelo Street have seen solid value growth, which means these borrowers often have more equity than when they first bought. That equity gives you more options when refinancing - potentially qualifying for lower rates or accessing funds for other purposes.

Consider someone who fixed their rate at 2.1% in late 2021 on a $650,000 loan for a riverside apartment. When that period ends, their lender's standard variable rate might be around 6.5%. If they refinance to a competitive variable rate, they could reduce that to something closer to current offerings - potentially saving them several thousand dollars each year, depending on where rates sit when they refinance.

The Case for Switching to Variable Right Now

Variable rates give you flexibility that fixed rates don't. You can make unlimited additional repayments without penalty, access redraw facilities, and use offset accounts to reduce the interest you pay. If you've built up savings or expect irregular income - bonuses, commissions, or rental income from an investment property - these features let you put that money to work immediately.

For South Perth residents who work in the city and receive annual bonuses or have dual incomes with variable cash flow, an offset account linked to a variable rate can be particularly valuable. Every dollar sitting in that account reduces the interest charged on your loan amount. If you keep $30,000 in offset against a $600,000 loan, you're only paying interest on $570,000.

The refinance process for switching to variable typically takes three to four weeks from application to settlement. Your property valuation will be part of this process, and current values in South Perth provide a solid position for many borrowers. Lenders will assess your loan-to-value ratio based on today's property values, not what you paid years ago.

When Fixing Again Makes More Sense

Some borrowers coming off a fixed rate prefer to lock in again, particularly if they value certainty over flexibility. If you're on a tight budget and need to know exactly what your repayment will be each month, another fixed period might suit your circumstances.

You can also split your loan - fixing part and keeping part variable. This gives you some certainty on a portion of your debt while maintaining access to features like offset and redraw on the variable portion. In our experience, this approach works well for households with one stable income and one variable income, or for those who want to make extra repayments but still want some protection from rate rises.

How Property Valuations Affect Your Refinance Options

Your property's current value determines how much you can borrow and what rates you'll qualify for. South Perth properties, particularly those within walking distance of the Perth Zoo or overlooking the river, have generally held their value well. If your property has increased in value since you bought it and you've been paying down your loan, you'll likely have a lower loan-to-value ratio now than when you started.

A lower LVR often means access to lower interest rates. If you've dropped below 80% LVR, you'll avoid lender's mortgage insurance on your refinance and typically qualify for improved pricing. If you've dropped below 70% LVR, you'll usually access the lender's most competitive rates.

This is where a loan health check becomes valuable. Understanding where you sit with equity and LVR before you start the refinance application helps you know what to expect and whether timing matters. If you're close to hitting a better LVR threshold, waiting a few months while you make additional repayments might improve your options.

What the Refinance Application Requires

Lenders will want to see your income documentation - payslips, tax returns if you're self-employed, and details of any rental income or other earnings. They'll also assess your current debts, living expenses, and credit history. If your financial situation has improved since you took out your original loan, refinancing can be straightforward.

Some South Perth borrowers use this opportunity to consolidate other debts into their mortgage. If you have personal loans, car loans, or credit card debt with higher interest rates, rolling these into a home loan can reduce your overall monthly commitments and improve cashflow. The interest rate on a home loan is typically lower than other forms of consumer debt, though you'll be paying it off over a longer period unless you make additional repayments.

If you're considering this approach, the numbers need to make sense. Adding $40,000 of car debt to your mortgage might reduce your monthly payments by $800, but if you don't maintain additional repayments once the car loan would have been finished, you'll end up paying more interest overall. A mortgage broker in South Perth can work through these calculations with you based on your specific loan amount and circumstances.

Timing Your Switch from Fixed to Variable

You can start your refinance process up to six months before your fixed rate period ends. Most lenders will let you lock in a rate up to 90 days before settlement, though this varies by lender. Starting early gives you time to compare options, gather documentation, and avoid the rush as your expiry date approaches.

If you wait until after your fixed rate has already expired and you've rolled onto the standard variable rate, you can still refinance - you're not locked into staying with that lender. However, starting earlier usually means less time paying the higher standard rate.

For borrowers with a fixed rate expiry approaching, having a conversation about your options three to four months beforehand means you're not making rushed decisions. Your circumstances might have changed since you first took out the loan. You might have different priorities now, different income, or different plans for the property.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, look at what's available in the market, and help you determine whether switching to variable, fixing again, or splitting your loan makes the most sense for your situation.

Frequently Asked Questions