When your fixed rate ends

A fixed rate ends on the end date the loan contract names. From that date, the repayment follows the lender's variable rate. The balance, the term and the offset links carry on as before. The monthly payment changes, and for most loans fixed in the last few years it will rise.

What the lender's letter will say

Lenders write a few weeks before the date with the new rate and the new repayment. Look first at the gap between the old and the new monthly payment. That is the cash that has to come from somewhere.

Read it against the loan's balance on the same date. A large balance with a small rate change can cost more than a small balance with a large one. If the loan has an offset account, the interest is charged on the balance less the offset. So the change you pay is smaller than the letter's figure.

Ninety days before the date

Setup lists a fixed rate that ends within ninety days, and so does the monthly digest. That gives you time to ask your lender what the variable rate would be, and to ask another lender too. You can then record the answer as a proposed refinance, so the comparison runs on real terms.

A loan that has already rolled over cannot be changed in time, so the reminder comes early.

Reading the comparison

The refinance page puts the current terms beside the proposed terms. It shows the monthly payment, the interest to maturity, the payoff date and the switching costs.

Read the interest to maturity first. A lower monthly payment that comes from a longer term can cost more over the life of the loan. Read the break-even month second. It says how long the new loan takes to win back the switching costs. If you expect to hold the property for less time than that, the switch costs more than it saves on these numbers.

What to record when it rolls

Record the new terms on the loan as a term change from the roll date, not as a new loan. Then the balance history stays whole and the interest history stays correct. The cashflow for the financial year also splits the interest on the right date.

If you refinance to another lender instead, close the old loan with its final payout. Then open the new loan from settlement, so the two do not overlap in the position.