I’m a Young Homeowner with a Fixed Loan Ending. What’s Next?

Originally published in The Sydney Morning Herald.

If this applies to you, it might be time to make a game plan.

“Is Mum or Dad bidding for you today?” a real estate agent asked in a baby voice, as I did a second walkthrough of a home I was interested in. “No, it’ll be me,” I responded, in my confused, prospective first-time buyer voice.

With sunnies on and an auction face not to be messed with, after what felt like an eternity of bidding the auctioneer yelled ‘sold!’ – unbelievably to me.

In 2021, I became a solo homeowner and was ecstatic.

Almost two years on, even with interest rate rises and the wave of uncertainty that has rushed over Australian mortgage holders, I’m still happy with my decision to get into the property market. But I wonder when reading back on this in 10 years whether I’ll feel the same.

With lenders so eager to secure loans during the pandemic, and historically low-interest rates, it made sense for me to fix most of my loan. Thank goodness I did.

The certainty of knowing, pretty much, exactly how much my repayments are each month has undoubtedly served me well. Not just from a budgeting sense, but for my mental well-being.

Until now, I’ve been lucky with not needing to endure the stress and uncertainty of massive repayment increases. But things are bound to change very soon, with my loan expiring mid-year and my interest rate set to at least double.

I’m an optimist, which helps, but optimism does not pay the mortgage. Things will inevitably become more financially challenging for me this year. Step one has been realising this and not hoping for the best, as I would in most situations. Or worse, believing that things might miraculously turn around and rate hikes will calm down soon – dangerous thinking.

Instead, I am focusing on what’s within my control. The first thing is simply reviewing and reducing my spending. From eliminating big-ticket items I don’t need to be spending on in the short term, such as travel to little things such as replacing my afternoon barista-made coffee with an instant Moccona cappuccino sachet (they’re really not so bad, even for a Melburnian who adores her coffee).

The second, more significant, point of action is speaking to my mortgage broker well before my current loan comes to an end. I’m eager to know what my options are sooner rather than later, to avoid any rushed decisions.

Once my loan expires, my mortgage will likely revert to the bank’s standard variable rate, likely to be around 6 per cent. This will be higher than the discounted variable rate I was offered as a new customer.

While I want to explore what refinancing could look like with my current bank, if the repayments are more than what I can afford, and I’m unsatisfied, I’ll look at what other banks can offer. The potential to move to a lower-rate lender, if that better suits my requirements and budget, provides me with some reassurance.

There are also banks offering sizeable cashback offers for transferring mortgages to them. I’ve seen a few offering up to $6000. If I’m able to change to a new lender – with a cashback offer and lower interest rates – I could be better off than staying with my current bank.

I’m also leaning into my side hustle of freelance writing more (case in point) to safeguard myself that bit further.

A final note. Being a solo homeowner has meant I’ve had to be quite conscious about my spending from day dot. With that, I’ve learnt to say no to things that I simply can’t afford or really struggle to justify.

For anyone – homeowner or not – feeling any kind of pressure in a social or financial sense, I want to say that most people are extremely understanding if you say you’re trying to be mindful with your money.

You usually don’t need to say any more than that. In the times when people tease or judge, remember looking “cool” or like you can afford something is simply not worth it. Especially if it means putting yourself under financial stress.

Featured image: Pixabay.

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