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!!
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 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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
terry@discoverhomeloans.com.auTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
thank you all, nice rule of thumb there iambored, appreciate your reply.
cheers
brahms
If you don’t ask, the answer is no!!
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.
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
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