I have a friend who had locked his loan in with a 5 year fixed rate at 8.54%. Last week he decided to switch to a variable rate and was advised the penalty fee would be $92,000!!
He went ahead with it and is now getting around 7.82% variable.
This is the largest exit fee i have ever heard of!
Terryw | 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
I work for a bank and see such fees on a daily basis. Most I had seen was about $30,000, and that was for a $2.5 mil loan. The way the fixed break costs are calculated is quite complex, and people should really be informed of the fees and charges involved before they go and fix their loan. Then again, most may not fix it, if they knew the exit fees involved would be a pain!
Geez, before paying a lump sum like that (or capitalising it) you would want to be sure that a saving of .72% over five years was going to equate to alot more than a PV of $92,000. The payout should reflect the amount of interest that the bank would lose by swapping to a lower rate loan.
I sure hope you weren't advising him to take it up considering the commission you would have made out of it.
IP
This deal has nothing to do with me. It was anothe broker who decided he had better bite the bullet and get out of it now before rates dropped further.
Also you should watch who you slander publically. There is no comission payable for switching loans anyway!
Terryw | 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
No offence meant Terry – it was tongue in cheek.
Who here feels agrieved by RAMS / RHS home loans and the way theirs has been handled…????
check out http://www.rhgripoff.com
I know this is too late for the original poster of this thread but I have a similar story with a twist worth keeping in mind for anyone with a fixed loan.
I too had a 5 year fixed (investment) home loan for $420k . Due to a change in circumstances I needed to offload the property & break the fixed term. The break fee was going to be around $70k. Phew!
I, thankfully, have a great bank manager (Yes Virginia, they do exist) who helped me greatly.
I sold the IP for $485k. Rather than use the proceeds to pay out the loan (and fee which would absorb ALL the $ profit/growth) the security for the investment loan was transferred to another property thereby keeping the loan ongoing. He also was able to reduce the amount of the loan from $420k to $220k (using $200k of the sale $) putting the remaining $ from the sale into my bank account.
By holding this sale cash in a term deposit the income goes a long way to making the repayments until the original 5 year term expires. At that time I payout the remaining loan with no break fee. Of course we all know how putting your money in the bank is a waste of time…….Yep got screwed by RAMS AND RHG… but luckily getting out in 3 months time yeah a jail term of 3 years is a long time to be sitting on the fence.
Also what are the current rates with the Majors for a pro pack including discount. low 5's or high 4's?
anyone tell me please?
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