If your fixed rate period is ending or you're locked into a rate that no longer suits your situation, switching to a variable rate through refinancing might reduce your monthly repayments and give you access to features that weren't available on your fixed loan.
When Switching to Variable Makes Sense
Refinancing from fixed to variable is worth considering when your fixed rate period is about to end and the revert rate is higher than current variable options, or when you need loan features like an offset account or extra repayments that your fixed loan doesn't allow. If you're a clinical pharmacist working rotating shifts or picking up locum work, the flexibility to make extra repayments when you have additional income can help you reduce interest costs over time without penalty.
Consider a clinical pharmacist coming off a fixed rate of 5.8% who is about to revert to their lender's standard variable rate. If that revert rate sits around 6.5% but other lenders are offering variable rates closer to 6.0% with offset accounts, refinancing to a lower rate could save several hundred dollars each month while also giving access to features that suit irregular income patterns.
The Refinance Application Process
The refinance process involves applying to a new lender, who will assess your current income, expenses, and property value before approving a loan to pay out your existing mortgage. Most lenders will require recent payslips, tax returns if you do locum work, and a property valuation to confirm your equity position. For clinical pharmacists, lenders typically recognise your profession as stable employment, which can work in your favour during the assessment.
If you've been making extra repayments into a redraw facility on your fixed loan, you'll need to withdraw those funds before settlement or factor them into your refinance loan amount. Some lenders allow you to port those savings across, but this depends on your new loan structure and whether you're setting up an offset account instead.
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Fixed Rate Break Costs and Timing
If you're still within your fixed rate period, switching early will usually trigger break costs, which are calculated based on the difference between your fixed rate and the wholesale rate your lender can now lend at. These costs can run into thousands of dollars if rates have fallen significantly since you fixed, so refinancing early only makes sense if the ongoing savings outweigh the upfront cost.
If your fixed rate ends in the next three months, most lenders will let you lock in a new rate now without break costs, allowing you to avoid the revert rate entirely. This is particularly useful if you're coming off a low fixed rate taken out a few years ago and want to secure a variable rate before your loan automatically rolls over.
Offset Accounts and Redraw After Refinancing
Variable loans typically come with offset accounts, which reduce the interest you pay by offsetting your account balance against your loan amount. If you're used to a redraw facility on your fixed loan, an offset account works differently because the funds remain accessible in a separate transaction account rather than being locked into the mortgage.
For a clinical pharmacist managing shift work income, an offset account lets you deposit your pay and immediately reduce interest without committing those funds as extra repayments. If you're saving for a second property or building a deposit for an investment, keeping those funds in an offset account rather than redraw can give you faster access when you're ready to move. For those looking to access equity for investment, refinancing to a variable loan with an offset can also align with a broader strategy to build your portfolio.
Loan Features to Compare When Refinancing
When switching to a variable rate, compare not just the interest rate but also whether the loan includes an offset account, allows unlimited extra repayments, and offers redraw if you prefer that structure. Some variable loans come with annual fees, while others are fee-free but have slightly higher rates. Depending on your loan amount and how much you plan to keep in offset, a loan with a fee but a lower rate might still cost less overall.
If you're a clinical pharmacist considering a move into consultancy or locum work, choosing a loan that doesn't penalise you for irregular income or lump sum repayments gives you more control as your work pattern changes. Some lenders also allow you to fix a portion of your loan while keeping the rest variable, which can be useful if you want rate certainty on part of your mortgage but still want access to offset and extra repayments on the remainder.
Property Valuation and Equity Position
Your new lender will arrange a valuation to confirm your property's current value, which determines how much equity you have and whether you need to pay lenders mortgage insurance if your loan-to-value ratio is above 80%. If your property has increased in value since you bought it, you may have more equity than expected, which can improve your refinance options or let you borrow additional funds if needed.
If you're planning to buy your next home or upgrade in the near future, understanding your equity position now helps you plan the timing of your next purchase. Refinancing to a variable loan can also make it easier to access that equity later without needing to break another fixed term.
How Long Refinancing Takes
Most refinance applications take between three to six weeks from application to settlement, depending on how quickly you can provide documents and how long the valuation and approval process takes. If your fixed rate period is ending soon, starting the refinance process at least six weeks before the end date gives you time to settle onto your new loan without reverting to a higher rate in the meantime.
If you're refinancing while still working full-time in a hospital or clinical role, the process is straightforward as long as your income is consistent and you don't have significant changes in employment or expenses during the application period. For those with locum income, having recent tax returns and a clear history of consistent work makes the application smoother.
Switching from a fixed to a variable rate through refinancing can reduce your repayments, give you access to features that suit your income pattern, and position you for future property decisions. Call one of our team or book an appointment at a time that works for you to review your current loan and compare your refinance options.
Frequently Asked Questions
When should I refinance from a fixed to a variable rate?
Refinance when your fixed rate period is ending and the revert rate is higher than current variable options, or when you need features like offset accounts and unlimited extra repayments. If you're still in your fixed term, refinancing early may trigger break costs that outweigh the savings.
What are break costs and how are they calculated?
Break costs are fees charged by your lender if you exit a fixed rate loan early. They're calculated based on the difference between your fixed rate and the current wholesale rate your lender can lend at, and can be substantial if rates have fallen since you fixed.
How does an offset account differ from redraw?
An offset account is a separate transaction account where your balance reduces the interest charged on your loan, while redraw holds extra repayments within the loan itself. Offset accounts typically offer faster access to funds and don't require a withdrawal process like redraw does.
How long does it take to refinance from fixed to variable?
Most refinance applications take three to six weeks from application to settlement. Starting the process at least six weeks before your fixed rate period ends helps you avoid reverting to a higher standard variable rate.
Do I need a property valuation when refinancing?
Yes, your new lender will arrange a valuation to confirm your property's current value and determine your equity position. This valuation affects your loan-to-value ratio and whether you need to pay lenders mortgage insurance if borrowing above 80%.
