How to Refinance from Variable to Fixed Rate

Why WA Government Employees Switch from Variable to Fixed

Refinancing from a variable rate to a fixed rate gives you payment certainty for a set period, typically between one and five years. This protects you from rate rises during that time, though it also means you miss out if rates fall. For WA Government Employees with secure employment, the decision often comes down to whether you value budget certainty more than the flexibility to make extra repayments or access redraw without restriction.

Consider a public sector employee in Joondalup with three years left on a 30-year loan. They are currently on a variable rate and want to lock in their repayments while managing school fees and a planned kitchen renovation. Switching to a three-year fixed rate means their fortnightly payment stays the same regardless of Reserve Bank decisions during that period. They cannot make extra repayments beyond a small annual limit, but they know exactly what their mortgage costs each pay cycle.

When Fixing Makes Sense for Public Servants

You should consider refinancing to a fixed rate if you need budget certainty over the next few years and are comfortable giving up full repayment flexibility. Public servants in WA often have predictable salary progression under enterprise agreements, which makes it easier to commit to a fixed repayment without worrying about income fluctuations. The risk is that you lock in at a rate that looks high if the Reserve Bank cuts rates shortly after you fix.

In our experience, the public servants who benefit most from fixing are those managing other financial commitments, such as dependent care costs or planned expenses like a second vehicle. If you are prioritising debt reduction and want to make large extra repayments whenever your budget allows, a variable rate or split structure usually makes more sense. A loan health check can clarify whether your current rate and loan features still suit your circumstances.

Fixed Rate Terms and Repayment Limits

Most lenders offer fixed rate terms from one to five years, with three years being the most common choice. During the fixed period, you are typically limited in how much extra you can repay each year, often capped at $10,000 to $30,000 depending on the lender. Redraw on fixed loans is either unavailable or restricted, and offset accounts are rarely available on pure fixed rate products. If you exit the fixed rate before the term ends, you may face break costs, which are calculated based on the difference between your fixed rate and the lender's current wholesale funding cost.

If you want some flexibility during the fixed period, a split loan structure lets you fix a portion of your loan and keep the remainder on a variable rate. This gives you budget certainty on part of your repayment while maintaining full redraw and offset access on the variable portion. Public servants with irregular bonuses or salary packaging arrangements often use this structure to balance certainty with the ability to make lump sum payments when funds are available. For more on how this works when you are home loan refinancing for public servants, the key is deciding what proportion to fix based on your cash flow.

How the Refinance Application Works

The process to refinance from variable to fixed is the same as any other refinance. Your lender will reassess your income, expenses, and the current value of your property. For WA Government Employees, income verification is usually straightforward because public sector payslips show base salary, allowances, and any salary packaging clearly. The lender will apply serviceability buffers to make sure you can afford the loan if rates rise, even though you are fixing.

Most lenders will require a property valuation, either a desktop assessment or a physical inspection depending on your loan amount and the time since your last valuation. If your property has increased in value since you purchased, this may improve your loan-to-value ratio and give you access to lower rates or remove any lender's mortgage insurance that was applied at purchase. Settlement usually takes two to four weeks once your application is approved, and the lender will arrange for your existing loan to be discharged and the new loan registered on title.

Comparing Rates and Lender Features

Fixed rates vary between lenders, and the advertised rate is not always the one you will receive. Your actual rate depends on your loan-to-value ratio, the fixed term you choose, and whether you are taking an owner-occupied or investment loan. Some lenders offer discounted fixed rates if you meet certain criteria, such as borrowing above a minimum amount or holding other products with the bank.

When comparing, look beyond the rate itself. Check the annual extra repayment limit during the fixed period, whether the lender allows redraws at all, and what break cost formula they use if you need to exit early. Some lenders let you make unlimited extra repayments in the final year of the fixed term, while others hold the restriction right through to expiry. If you are refinancing an investment loan, check whether the lender applies different serviceability treatment to rental income, as this can affect how much you can borrow. You can review current options through a loan health check to see where your existing loan sits relative to what is available now.

Break Costs and Early Exit

If you sell your property or refinance again before your fixed term ends, the lender may charge break costs. These costs are not a penalty but an economic adjustment to compensate the lender for the difference between your fixed rate and the rate they can now lend that money at. If rates have risen since you fixed, break costs are usually zero or minimal. If rates have fallen, break costs can be substantial.

The exact calculation varies by lender, but it is generally based on the remaining fixed term, your remaining loan balance, and the movement in wholesale swap rates since you fixed. Some lenders waive break costs if you are selling to buy another property and refinancing with the same lender, but this is not universal. Before committing to a fixed rate, make sure you understand the lender's break cost policy and whether your circumstances are likely to change during the fixed period.

Split Loan Structures for Flexibility

A split loan lets you divide your loan into two or more portions, each with its own rate type and features. A common approach is to fix 50% to 70% of your loan and leave the rest on a variable rate with an offset account. This gives you stable repayments on the majority of your loan while keeping full flexibility on the variable portion.

For example, a WA Government Employee refinancing with $400,000 remaining might fix $280,000 on a three-year term and leave $120,000 on a variable rate linked to an offset account. Their fortnightly repayment on the fixed portion stays constant, and any surplus income goes into the offset account to reduce interest on the variable portion. If they receive a bonus or salary packaging refund, they can deposit it into the offset without hitting fixed rate repayment limits. This structure works particularly well for public servants who have predictable base income but irregular additional payments.

Releasing Equity When You Refinance

If your property has increased in value since purchase, refinancing gives you the opportunity to access equity for other purposes, such as buying an investment property, funding renovations, or consolidating other debts. You can refinance to a fixed rate and release equity at the same time, though the amount you can access depends on your loan-to-value ratio and how much the lender will lend based on your income.

Most lenders will allow you to borrow up to 80% of your property value without paying lender's mortgage insurance, and some lenders offer LMI waivers for public servants, which can allow you to borrow up to 90% or 95% in certain cases. If you are refinancing to release equity and fix your rate, check whether the lender applies the same fixed rate to the full loan amount or charges a different rate on the additional borrowing. Some lenders split the loan automatically if you are increasing your borrowing and fixing at the same time.

What Happens at Fixed Rate Expiry

When your fixed rate term ends, your loan automatically reverts to the lender's standard variable rate unless you take action. The revert rate is often higher than competitive variable or fixed rates available in the market, so you should review your options at least three months before your fixed rate expiry. You can refinance to another lender, negotiate a new fixed or variable rate with your current lender, or switch to a different loan product within the same lender's range.

Many public servants set a reminder six months before their fixed term ends and request a comparison of current rates at that time. This gives you enough time to apply for a new loan if refinancing makes sense, without being forced onto the revert rate while your application is in progress. If rates have changed significantly since you fixed, refinancing at expiry is often the point where you can reassess whether fixing again suits your circumstances or whether switching to a variable rate with offset and redraw makes more sense.

Refinancing from variable to fixed gives you certainty when you need it, but it requires you to weigh that certainty against the cost of reduced flexibility. For WA Government Employees, the decision depends on your cash flow, your tolerance for rate movements, and whether you value the ability to make extra repayments or access funds through redraw and offset. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions