Top tips to switch from variable to fixed rate

You can switch from a variable to a fixed rate by refinancing your home loan with your current lender or a new one.

Most self-employed business owners we work with are drawn to fixed rates during periods of uncertainty or when they want predictable repayments for budgeting. The decision often comes down to whether you value certainty over flexibility, and whether your business cashflow benefits from knowing exactly what your mortgage repayment will be each month.

Why refinance from variable to fixed

Locking in a fixed rate gives you protection against rate rises for a set period, usually between one and five years. If you run a business with seasonal income or irregular cashflow, fixed repayments can make financial planning more straightforward. You know what your housing cost will be, which makes it easier to allocate funds to other parts of the business or personal expenses.

That certainty comes with trade-offs. Most fixed rate loans restrict your ability to make extra repayments beyond a certain amount each year, typically around $10,000 to $30,000 depending on the lender. If you normally put surplus business income toward your mortgage when cashflow is strong, a fixed rate might limit that flexibility. You also lose access to offset accounts in most cases, which can be a significant consideration if you keep operating funds or tax reserves in offset to reduce interest.

Consider a business owner with fluctuating monthly income who prefers certainty over the next few years. They might value knowing their repayment stays constant even if rates climb, and they might not rely on parking business funds in offset because they keep those in a separate business account. For them, switching to fixed makes sense. Someone else with consistent cashflow and a large offset balance might find the loss of that feature costs them more than the fixed rate saves.

How the refinance application works for self-employed borrowers

Lenders assess self-employed applicants using tax returns and often business financials, which means the refinance application process can take longer than it does for PAYG employees. You will typically need two years of personal tax returns, and sometimes two years of business financials depending on your business structure and the lender's policy.

If your most recent financial year shows lower income due to business reinvestment or write-offs, some lenders will average your income across two years or allow you to add back certain deductions. Others take a more conservative view and assess you on the lower figure. This can affect how much you can borrow, or whether you can refinance at all if your income has dropped since you originally took out the loan.

In our experience, the biggest delay in self-employed refinance applications comes from incomplete financials or tax returns that have not yet been lodged. If you are considering a switch to fixed and your accountant has not finalised your latest return, it often makes sense to wait until that is done rather than proceeding with older documents that might not reflect your current income.

Fixed rate terms and what happens when they end

Most lenders offer fixed terms from one to five years. The longer the term, the more certainty you get, but also the longer you are locked into the restrictions that come with a fixed loan. At the end of the fixed period, your loan will revert to a variable rate unless you refinance again or negotiate a new fixed term.

That reversion rate is often higher than the advertised variable rate for new customers, which means you could end up paying more unless you take action before the fixed term expires. Plenty of borrowers set a calendar reminder six months before their fixed period ends so they have time to compare options, whether that means fixing again, switching back to variable, or moving to a different lender.

You can also split your loan, putting part on a fixed rate and part on variable. This gives you some certainty while maintaining access to offset and extra repayment features on the variable portion. The split does not have to be 50/50. You might fix 70% and leave 30% variable, or any other combination that suits your situation.

What it costs to switch

If you are refinancing to a new lender, you will pay application fees, valuation fees, and sometimes discharge fees from your current lender. These can add up to a few thousand dollars, although some lenders offer partial or full fee rebates if you are borrowing above a certain amount.

If you are currently on a fixed rate and want to break that contract early to switch lenders or move to a different fixed term, break costs can apply. These are calculated based on the difference between your fixed rate and the current wholesale rate your lender can get for the remaining fixed period. If rates have dropped since you fixed, break costs can be substantial. If rates have risen, break costs might be zero or minimal.

Switching from variable to fixed with your existing lender usually avoids discharge fees and sometimes avoids valuation costs, but you lose the opportunity to compare what other lenders are offering. We regularly see situations where the rate saving from moving to a new lender more than covers the switching costs, even after accounting for valuation and application fees.

When a fixed rate might not suit your situation

If you are planning to release equity in the next year or two to fund another property purchase or business investment, a fixed rate can complicate that. Increasing your loan amount during a fixed term often means breaking the fixed contract and paying break costs, or alternatively taking out a separate loan for the additional amount.

Similarly, if you expect to sell the property or pay down a large portion of the loan during the fixed period, you might face break costs that outweigh the benefit of having locked in the rate. This comes up often with business owners who receive irregular lump sums from asset sales or business exits and want the option to pay those directly onto the mortgage without penalty.

Variable rates also give you access to features like offset accounts and unlimited extra repayments, both of which can reduce the interest you pay over time if you use them consistently. For some borrowers, the interest saved by keeping funds in offset or making regular extra payments exceeds the difference between the variable and fixed rate.

Call one of our team or book an appointment at a time that works for you if you want to compare fixed and variable options based on your current income structure and business goals.

Frequently Asked Questions