Fixed Rate Break Costs

Viewing 7 posts - 1 through 7 (of 7 total)

brahms
Participant
@brahms
Join Date: 2004
Post Count: 485
June 2, 2004 - 11:55 am
I know each situation varies, but can someone provide a general straight forward description of how break costs are calculated.
cheers
brahms
If you don’t ask, the answer is no!!
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
June 2, 2004 - 11:29 pm
Good explanation.
All of the banks should actually pay you out if you break a low rate!
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
June 3, 2004 - 1:10 am
Pisces,
I have heard of people being paid under these circumstances – though not lately.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
June 3, 2004 - 1:28 am
I have a fixed loan on a property that I was thinking about selling recently. As the rates were moving, I was ringing the bank to get the break costs and they varied from $5000 to about $1000 depending on the interes rate at the time.
There is a complex formula they use and I think it may even be in the mortgage documents. You could ring the bank and just ask for a figure or they may even be able to give you the actual formula.
Terryw
Discover Home Loans
North Sydney
[email protected]
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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brahms
Participant
@brahms
Join Date: 2004
Post Count: 485
June 3, 2004 - 2:42 am
thank you all, nice rule of thumb there iambored, appreciate your reply.
cheers
brahms
If you don’t ask, the answer is no!!
Nat R
Member
@nat-r
Join Date: 2004
Post Count: 224
June 3, 2004 - 2:43 am
They use a term called ‘full economic break costs’ which roughly translates to :
If I lend you $100,000 at 9% for 5 years and after 2 years you break the loan and I can only relend the money back out at 6% then you owe me the present value (PV) of 3% on $100,000 for 3 years.
Administrator
Keymaster
@piadmin
Join Date: 2013
Post Count: 3,225
June 3, 2004 - 8:28 am
I posted and said that I found it hard to imagine a bank paying a borrower for paying out his loan early.
I subsequently deleted the post.
MortgageHunter, I still find it hard to believe.
However, if you say that it has happened I have little or no choice other than to unconditionally accept what you say.
Brahms, if you at present have a fixed interest rate loan you should find the formula described in your conditions and terms of the loan.
If you don’t then I suggest you go to (for example) a St George branch and ask for their (free) booklet on terms and conditions of a home loan. This will give you some idea what sort of formula is used.
However, each lender is likely to have their own type of formula.
Pisces