Fixed to Variable Refinance: What Not to Do

Switching from a fixed rate to a variable rate can make sense, but only if the numbers work after you count every cost of leaving.

For a nurse or midwife on rotating shifts, the decision is rarely about chasing a headline rate. It is about whether the switch frees up cashflow, adds useful features, and still leaves you ahead once fees are paid. A refinance can do all three, or none of them.

Should You Refinance From Fixed to Variable Before Your Fixed Rate Ends?

Only if the savings and benefits clearly outweigh the break fee and other switching costs. If your fixed term is close to ending, waiting is often the cheaper option, because no break fee applies once the term is over.

A break fee is charged when you end a fixed rate loan before the term finishes. It is not charged on variable loans. The fee depends on your lender and your contract, so ask for a written figure before you decide anything. Our fixed rate expiry page explains your options as the end date approaches.

The main risk of moving early is simple. You pay a cost now for a saving that may be smaller than expected, because a variable rate can rise or fall at the lender's discretion.

Fixed Rate Break Costs and Other Switching Fees

The costs of switching can include a break fee, a discharge fee, and an application fee on the new loan. If you move to a new lender, you may also pay costs tied to the new loan, and ASIC's Moneysmart site lists these as things to check before you switch.

An exit fee on a loan secured over residential property is generally banned if the loan started on or after 1 July 2011. That ban does not cover break fees or discharge fees, so those can still apply.

If you have less than 20 per cent equity, lenders mortgage insurance may apply on the new loan, which can wipe out a saving. Your broker should add up every cost, including any broker fee, before recommending a move. Brokers must act in your interests when they recommend a refinance, and that includes telling you when staying put is the better call.

Worked Example: Is the Switch Worth It?

Consider a registered nurse with a $500,000 balance and 25 years left, who is asked to pay a break fee to leave a fixed loan. For illustration only, we will use a rate of 6.75% p.a. as the new variable rate.

At 6.75% p.a. over 25 years, principal and interest repayments are about $3,455 a month. Suppose the nurse's fixed rate is 0.50 percentage points higher, at 7.25% p.a. At that illustrative rate, repayments are about $3,615 a month. The difference is about $160 a month, or roughly $1,920 a year.

If the lender quotes a break fee of $4,000 plus $600 in other switching costs, the total is $4,600. At $160 a month, it would take around 29 months to recover that cost. If the fixed term ends in 8 months, waiting is the stronger option. If it ends in 30 months or more, the switch may be worth it, provided the variable rate stays similar.

The outcome here is a clear decision rule. Divide your total switching costs by your monthly saving, then compare the result to the months left on your fixed term. These figures are illustrative only, and a calculator will give you numbers based on your own loan.

What You Gain by Moving to a Variable Rate

The main gains are features that many fixed loans limit or exclude, such as an offset account and redraw. An offset account reduces the balance interest is charged on, and redraw lets you access extra repayments you have made.

For shift workers, this flexibility can matter. Overtime, penalty rates and night shift loadings arrive in uneven amounts. Extra repayments made in a good month can be pulled back out through redraw if a rostering change cuts your pay. Many fixed loans cap extra repayments, so check what yours allows.

The trade-off is that a variable rate can move up. Your repayments can rise without warning, so only switch if your budget could cope with a higher repayment. A loan health check can show whether your current loan still suits you.

Split Loans: Keeping Part of Your Loan Fixed

A split loan lets you keep part of the balance fixed and move the rest to variable. It gives some repayment certainty and some flexibility, but you carry two sets of terms.

Consider a midwife who has a fixed loan with a small portion of the term left, and wants access to an offset account. Her broker compares the cost of ending the full fixed loan against the cost of a split structure with a new lender. After the numbers are laid out, she decides to leave the fixed portion to run out and set up the new variable portion with an offset. She avoids a break fee on the part that is nearly finished, and her pay goes into the offset from day one. The outcome depends on her lender's rules, and a split may add fees or reduce how much you can offset, so she checks both before signing.

If you are on an Australian Government 5% Deposit Scheme loan, be careful. Refinancing to a lender that is not a Participating Lender is treated as full repayment of the loan, and the scheme benefit is lost. Staying with the scheme also means you cannot increase the loan or extend the term.

Will a Lender Approve Your Refinance?

A lender will assess your repayment history, income and expenses before approving a refinance. If your repayments have been on time and the new rate lowers your repayments, approval is often more straightforward than for a loan that adds debt.

ASIC guidance notes that a refinance to a lower rate without borrowing more is likely to be suitable where payments have been regular and your circumstances have not worsened. Lenders must also test whether you could still afford repayments if rates rose, using a buffer of 3 percentage points above the loan rate, as APRA confirmed in May 2026.

If your income has changed since you took out the loan, or your equity has dropped, some lenders can assess your case individually. Lenders can look at your past repayment behaviour in these cases. Our home loan refinancing page covers how we approach this for nurses and midwives, and refinancing for midwives covers the same for that profession.

If you are also thinking about borrowing more, say to release equity, that is a different decision with different rules. See our equity release page before combining the two.

Switching an Investment Loan

If the loan is on a rental property, borrowing more and using it for personal costs can change how much interest you can claim at tax time. Speak to your accountant before you add any private spending to an investment loan.

Borrowing expenses on a refinance, such as some loan establishment costs, may also be treated differently to day-to-day expenses. Your accountant can tell you what applies to your situation. Our investment loan refinancing page explains the lending side.

Call one of our team or book an appointment at a time that works for you. We will work out your break costs and compare your options.

Frequently Asked Questions