Aaron Whybrow explains what happens when your fixed mortgage rate ends: your old direct debit amount might not cover the new minimum payment. Missing even a few days of payments gets reported and tanks your credit score. Switch your direct debit to the lender's minimum before your rate rolls off.
Hey, it's Aaron here, your bagpipe and mortgage broker. Have you got a fixed rate coming off and you have a direct debit that has a fixed amount coming out each month? If you have a fixed amount of money coming out each month, say your interest rate is 2.69 and your repayment of $2025 on your $500 mortgage is a fixed direct debit. When your fixed rate rolls off, you're not going to be able to cover the minimum repayment. And what we are seeing is when you are not able to cover the minimum repayment, even within the first few days of not being able to cover that, say the direct debit comes out on the first, and then you're only able to correct it on the second, third, fourth or fifth, that bank or institution is going to report onto what the government has said, positive credit reporting. They're going to report a missed repayment. And if you're trying to do finance at the same time as the missed repayment goes through, you're going to have some trouble. I've seen credit files even halve their score when you have one missed repayment. And that could be as small as a dollar, it could be as large as a couple of thousand dollars. So if you have a fixed rate that is on a fixed repayment on your direct debit, you, you may need to prepare by changing that to the minimum repayment. So when you change it to the minimum repayment and the fixed rate rolls off, you'll be direct debited the right amount of money and then you can continue going on any refinances, restructuring, or changing your financial circumstances. If you're stuck in this situation where you're about to come off a fixed rate and there's some stuff you need to prepare, reach out today.
