Why Consider Switching from Variable to Fixed Rate?
If you're currently on a variable interest rate, you've likely experienced the ups and downs that come with rate movements. While variable rates can sometimes work in your favour when rates drop, they can also create uncertainty - particularly if you're self-employed or running a business where predictable cashflow is crucial for planning.
Switching to a fixed rate through mortgage refinancing gives you certainty. You'll know exactly what your repayments will be for the duration of your fixed rate period, which makes budgeting for your next investment property or business expansion much more straightforward.
For professionals and self-employed individuals focused on building wealth through property, this stability can be invaluable. When you're juggling multiple financial commitments or planning to access equity for your next investment, knowing your home loan repayments won't change unexpectedly provides real peace of mind.
Understanding the Refinance Process
The refinance process for switching from variable to fixed doesn't need to be complicated. Here's what you can expect:
- Loan review and health check - We'll assess your current home loan to identify whether refinancing makes sense for your situation
- Compare refinance rates - Look at current refinance rates from various lenders to find suitable options
- Property valuation - Your lender will need to value your property as part of the refinance application
- Submit your refinance application - Gather documentation and lodge your application
- Settlement - Once approved, your new loan settles and you move across to your fixed rate
As a self-employed borrower, you'll need to provide documentation that demonstrates your income. This typically includes tax returns, business financial statements, and BAS statements. Having these ready can help move the refinance application along more smoothly.
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Book a chat with a Finance & Mortgage Broker at Makara Finance today.
When Does Switching to Fixed Make Sense?
Timing matters when you're considering whether to switch to fixed. Here are scenarios where refinancing from variable to fixed might align with your goals:
You're planning significant investments - If you're looking to release equity to buy the next property or expand your business, locking in your home loan rate provides stability while you take on additional commitments.
Rate environment concerns - When you believe interest rates may rise, switching to fixed lets you lock in rate at current levels rather than risk being stuck on high rate later.
Cashflow certainty needed - Self-employed professionals often experience variable income. Fixed repayments mean one less moving part in your financial planning.
Accessing equity - If you're doing a cash out refinance to access equity in your property, you might choose to fix the loan amount to protect against rate increases on your larger borrowing.
What to Look for Beyond the Interest Rate
While accessing a lower interest rate is often the primary driver for refinancing, it's worth considering other features that could benefit your wealth-building strategy:
- Offset account options - Some fixed rate products offer partial offset accounts, which can help reduce loan costs while maintaining liquidity
- Redraw facilities - The ability to access extra repayments you've made can provide flexibility
- Split loan options - You might refinance and split your loan, keeping part variable and fixing part, giving you both stability and flexibility
- Loan features - Consider whether you need the ability to make extra repayments or pause repayments in certain circumstances
These features become particularly relevant for investment loans where you're managing multiple properties and need flexibility alongside certainty.
The Real Cost of Paying Too Much Interest
If you've been on a variable rate that's climbed significantly, you could be paying thousands more each year than necessary. Even a difference of 0.5% on a $600,000 loan amount can mean paying around $3,000 extra annually.
Over the life of your loan, this compounds dramatically. A loan health check can reveal whether you're paying too much interest and what savings might be available through refinancing.
For self-employed professionals building a property portfolio, every dollar saved on interest is a dollar that can be redirected toward your next investment or improving cashflow in your business.
Fixed Rate Considerations for Self-Employed Borrowers
As someone who's self-employed, you'll want to consider a few specific factors:
Break costs - Fixed rate loans typically come with break costs if you need to exit early. If your income or circumstances might change significantly, factor this into your decision.
Fixed rate period length - Common fixed periods are 1, 2, 3, or 5 years. Consider your investment timeline and when you might need to access additional equity.
What happens when your fixed rate period ends - Most loans revert to a variable interest rate once the fixed rate period concludes. You can always refinance again before this happens if you want to lock in another fixed term.
If you're a professional in a specific field, you might also have access to specialist loan products. For instance, our loans for doctors, loans for lawyers, and loans for accountants pages outline profession-specific options that could work alongside your refinancing strategy.
Making the Switch Work for Your Wealth Strategy
Refinancing isn't just about interest rates - it's about aligning your finance structure with your wealth-building goals. When you switch to fixed, you're making a strategic decision about risk management and cashflow stability.
Many self-employed professionals we work with use the certainty of fixed rate loans to confidently pursue their next investment opportunity. Whether that's releasing equity in your property to fund a deposit on an investment property or consolidating debt into your mortgage to improve cashflow, the predictability of fixed repayments provides a solid foundation.
Your refinancing strategy should consider your entire financial picture - your business income patterns, investment plans, and how you want to structure your borrowing to maximise tax efficiency and wealth accumulation.
Taking the Next Step
Switching from variable to fixed rate might be exactly what your financial strategy needs right now, or it might not suit your circumstances. Either way, understanding your options through a comprehensive loan review puts you in control.
At Makara Finance, we specialise in working with self-employed professionals who are serious about building wealth through property. We understand the unique challenges you face with income verification and the importance of structuring your finance to support your investment goals.
Whether you're coming off a fixed rate and considering your options, looking to save money refinancing your current variable loan, or wanting to unlock equity for your next property purchase, we're here to help you make informed decisions.
Call one of our team or book an appointment at a time that works for you. Visit our contact us page to get started on your refinancing journey.
