5 tips for preparing to come off a fixed rate
Better prepare yourself for coming off a fixed rate period of your loan. Here are 5 tips to help you feel more confident and in control.
1. Make debts easier to manage
If you have extra debts like a credit card that you don’t pay off each month, consider consolidating it into your home loan. By switching from multiple repayments to one simple one over the term of your home loan, it could help make managing your commitments a little easier and potentially free up some cash. You could also look to switch it out into a personal loan with terms that might suit you better.
Another alternative is to split the home loan so your consolidated debts can be paid off over a shorter term than your home loan*.
2. Avoid touching your redraw
If you’ve made progress on paying extra off your home loan, then that’s great news. Now’s the time when you’ll really benefit, as you’ll pay interest on a smaller balance which can help you pay it down sooner. Try and enjoy the benefits of your hard work for as long as possible by avoiding touching the money in your redraw.
Another option if you’re in advance by a decent amount is to use your redraw to effectively pay down your loan balance. It means the redraw would no longer be available however your minimum monthly repayment would reduce.
3. Stash your cash
If you’ve got some spare cash, don’t spend it now. Consider putting it aside to save for the proverbial rainy day. Hold off on making bigger purchases, such as upgrading your car or booking a holiday to help you put away some savings. Most of Community First’s home loans come with a 100% offset account, including fixed loans.
Another tip is to try and understand what your new mortgage repayments could look like and start adjusting now, by adding the difference to your home loan. This will give you time to adjust to your new expenses so it won’t come as a shock later.
You could also try to make some extra repayments on your mortgage to reduce your balance before you come off your fixed rate period.
4. Review your budget
Get ready to adapt to potential changes in your loan repayment amounts by taking a close look at your budget. By doing so, you'll gain valuable insights into where you may need to make adjustments in your lifestyle to accommodate the changes. It may require accepting the fact that your lifestyle needs may have to shift, but by being proactive, you can better prepare yourself for any upcoming financial challenges.
Regular budget reviews make for good financial housekeeping, and there might be some expenses you can cut back, or make some other sacrifices for the time being if things get a tad tight. Review items such as subscriptions or memberships to see where you can cut back. You can reconsider takeaway food, going out expenses and other shopping habits if your lifestyle needs to change.
If your finances are stretched to the limit, it may be time to consider more significant changes. For example, downgrading your vehicle, taking on extra paid work if it's feasible, or selling off an investment property or other asset. Remember, sometimes making tough choices is necessary to ensure your long-term financial well-being. Remember, every little bit helps.
5. Don’t bury your head in the sand
We’re here to support our members during uncertain times. At times things can get tricky, and we understand this. So, if finances are tight, contact us early to have an open discussion and we can work through your options together.
If you’ve got questions, you can reach out to us by getting in touch via our website or giving us a call on 1300 13 22 77.
This information on this website is general advice only and does not take into account your objectives, financial situation or needs (your "personal circumstances"). Before deciding whether to buy any product on this website you should consider your personal circumstances. You should read and consider the Terms and Conditions when deciding to use any product (terms and conditions, fees and charges may apply). Our product Conditions of Use are available on this website
*Terms and conditions, fees and charges apply. Consolidation of debt could mean your current loan debt will take longer to pay off with additional interest payable. Consider if this is right for your financial situation
Source:
1 Lovicu G, Lim J, Faferko A, Gao A, Suthakar A and Twohig D (2023), ‘Fixed-rate Housing Loans: Monetary Policy Transmission and Financial Stability Risks’, RBA Bulletin, March
https://www.rba.gov.au/publications/bulletin/2023/mar/fixed-rate-housing-loans-monetary-policy-transmission-and-financial-stability-risks.html
If you have extra debts like a credit card that you don’t pay off each month, consider consolidating it into your home loan. By switching from multiple repayments to one simple one over the term of your home loan, it could help make managing your commitments a little easier and potentially free up some cash. You could also look to switch it out into a personal loan with terms that might suit you better.
Another alternative is to split the home loan so your consolidated debts can be paid off over a shorter term than your home loan*.
2. Avoid touching your redraw
If you’ve made progress on paying extra off your home loan, then that’s great news. Now’s the time when you’ll really benefit, as you’ll pay interest on a smaller balance which can help you pay it down sooner. Try and enjoy the benefits of your hard work for as long as possible by avoiding touching the money in your redraw.
Another option if you’re in advance by a decent amount is to use your redraw to effectively pay down your loan balance. It means the redraw would no longer be available however your minimum monthly repayment would reduce.
3. Stash your cash
If you’ve got some spare cash, don’t spend it now. Consider putting it aside to save for the proverbial rainy day. Hold off on making bigger purchases, such as upgrading your car or booking a holiday to help you put away some savings. Most of Community First’s home loans come with a 100% offset account, including fixed loans.
Another tip is to try and understand what your new mortgage repayments could look like and start adjusting now, by adding the difference to your home loan. This will give you time to adjust to your new expenses so it won’t come as a shock later.
You could also try to make some extra repayments on your mortgage to reduce your balance before you come off your fixed rate period.
4. Review your budget
Get ready to adapt to potential changes in your loan repayment amounts by taking a close look at your budget. By doing so, you'll gain valuable insights into where you may need to make adjustments in your lifestyle to accommodate the changes. It may require accepting the fact that your lifestyle needs may have to shift, but by being proactive, you can better prepare yourself for any upcoming financial challenges.
Regular budget reviews make for good financial housekeeping, and there might be some expenses you can cut back, or make some other sacrifices for the time being if things get a tad tight. Review items such as subscriptions or memberships to see where you can cut back. You can reconsider takeaway food, going out expenses and other shopping habits if your lifestyle needs to change.
If your finances are stretched to the limit, it may be time to consider more significant changes. For example, downgrading your vehicle, taking on extra paid work if it's feasible, or selling off an investment property or other asset. Remember, sometimes making tough choices is necessary to ensure your long-term financial well-being. Remember, every little bit helps.
5. Don’t bury your head in the sand
We’re here to support our members during uncertain times. At times things can get tricky, and we understand this. So, if finances are tight, contact us early to have an open discussion and we can work through your options together.
If you’ve got questions, you can reach out to us by getting in touch via our website or giving us a call on 1300 13 22 77.
This information on this website is general advice only and does not take into account your objectives, financial situation or needs (your "personal circumstances"). Before deciding whether to buy any product on this website you should consider your personal circumstances. You should read and consider the Terms and Conditions when deciding to use any product (terms and conditions, fees and charges may apply). Our product Conditions of Use are available on this website
*Terms and conditions, fees and charges apply. Consolidation of debt could mean your current loan debt will take longer to pay off with additional interest payable. Consider if this is right for your financial situation
Source:
1 Lovicu G, Lim J, Faferko A, Gao A, Suthakar A and Twohig D (2023), ‘Fixed-rate Housing Loans: Monetary Policy Transmission and Financial Stability Risks’, RBA Bulletin, March
https://www.rba.gov.au/publications/bulletin/2023/mar/fixed-rate-housing-loans-monetary-policy-transmission-and-financial-stability-risks.html
Community First Credit Union LimitedABN 80 087 649 938 | Operating as Community First Bank | AFSL and Australian credit licence 231204| BSB 512-170