If you are a nurse or midwife buying your first home, check the extra repayment rules on a fixed rate loan before you choose it. Many fixed loans cap how much extra you can pay, and that can matter when your income swings with overtime and penalty rates.
This article is for first home buyers weighing up a fixed interest rate against a variable interest rate. It covers how fixed loans handle extra repayments, what the trade-offs are, and how a split loan can help.
Can You Make Extra Repayments on a Fixed Rate Home Loan?
Often yes, but many lenders limit the amount you can pay extra each year during the fixed term. Going over that limit can trigger break costs, so the cap is worth checking before you sign.
Caps differ between lenders and products, so we won't quote a standard figure here. Ask for the cap in writing, and ask whether it is counted per year of the fixed term or across the whole term. Variable loans generally let you pay extra without a limit, and many include features such as an offset account or redraw. Fixed loans are less likely to offer them, or may restrict them.
If you want to understand how rate structures work, our page on mortgages for nurses explains the basics.
Fixed or Variable: Which Suits a Shift Worker's Income?
A fixed rate gives you repayment certainty, while a variable rate gives you flexibility. Which one suits you depends on how much your income changes and how much you want to pay off early.
Nurses and midwives often earn extra through night shifts, weekends and overtime. That extra pay can go straight to your loan, but only if the loan lets you. A fixed loan locks in your repayment, which helps with budgeting. The trade-off is that your extra cash may be capped, and if rates fall during the fixed term you won't benefit.
The RBA cash rate is 4.85% p.a., but your loan rate will depend on your deposit size, your lender and any interest rate discounts you can negotiate. Check the rate on offer before you commit.
How a Split Loan Gives You Certainty and Room for Extra Repayments
A split loan puts part of your borrowing on a fixed rate and part on a variable rate. You get predictable repayments on one portion and unlimited extra repayments on the other.
As an example, consider a midwife buying her first home who borrows $600,000 over 30 years. She is comfortable with fixed repayments but picks up regular overtime and wants somewhere to put it. She splits the loan into $400,000 fixed and $200,000 variable, with an offset account on the variable portion.
Using the illustrative rate of 6.75% p.a. on both parts, the repayment on the $400,000 fixed portion over 30 years is about $2,594 a month. The $200,000 variable portion is about $1,297 a month. Together that is roughly $3,891 a month. Her overtime goes into the offset account on the variable portion, which cuts the interest charged on that portion without breaching any fixed cap. If rates change, the variable portion moves but the fixed portion does not.
The outcome is a repayment she can plan around, with a flexible portion for her overtime. The trade-off is that the variable portion carries rate risk, and the fixed portion will have break costs if she wants to exit early. A split can also mean two sets of fees or a package fee, so ask about the total cost.
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Fixed Rate Break Costs: What Triggers Them
Break costs can apply if you repay a fixed loan early, switch lenders or pay extra above the cap during the fixed term. The amount depends on your lender's calculation, so ask for an estimate before making a large lump sum payment.
Selling the property, refinancing or paying out a big chunk of the fixed portion can all trigger them. A bonus, a tax refund or a gift deposit that arrives later could be in this category. If you expect a lump sum in the next few years, a fixed loan with a low cap may not suit you. Our fixed rate expiry page explains what to expect when the fixed term ends.
What Happens When Your Fixed Term Ends?
When the fixed term ends, your loan usually moves to the lender's variable rate unless you choose a new fixed term or refinance. That reset rate may be higher than what other lenders offer, so review it a few months before expiry.
A loan health check is a good moment to compare your rate and features. Your fixed period is also when you can plan: if you know the cap, you can build savings in an offset or other account and use them once the term ends.
How Extra Repayments Fit With Your First Home Buyer Budget
Extra repayments only help if you first have a buffer for emergencies, since money paid into a fixed loan above the cap may not be accessible again. Redraw, where available, lets you retrieve extra payments, but lenders may limit or restrict it, and fixed loans often do not offer it.
Before deciding how much to put in, work out your repayment at the stress-tested rate, your shift income range and your living costs. Our borrowing capacity page shows how lenders view nurse and midwife income. Your upfront costs may also include stamp duty, which varies by state and territory, and you may be eligible for a concession or first home buyer grants. Our first home buyer guide covers the schemes and LMI waivers available to nurses and midwives.
If you are borrowing with a low deposit, lenders mortgage insurance (LMI) may apply, although some lenders offer waivers for eligible nurses and midwives. Policies vary by lender and change often, so we check the current position when we assess your situation.
Speak with a mortgage broker for nurses before you lock in a fixed rate. We can compare the extra repayment limits, break costs and features across lenders, and show you what a split loan would look like for your income. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Can I make extra repayments on a fixed rate loan?
Often yes, but many lenders cap the amount you can pay extra each year during the fixed term. Paying more than the cap can trigger break costs, so confirm the limit before you sign.
What is a split loan?
A split loan divides your borrowing between a fixed rate and a variable rate. The fixed portion gives predictable repayments, while the variable portion can allow unlimited extra repayments and features like an offset account.
What triggers fixed rate break costs?
Break costs can apply if you repay a fixed loan early, refinance, sell or pay above the extra repayment cap. Ask your lender for an estimate before making a large payment.
What happens when my fixed term ends?
Your loan usually reverts to the lender's variable rate unless you choose a new fixed term or refinance. Review your options a few months before the term ends.
