Another Fixed Rate Break Cost Scenario

[Jamie_D]

Hi guys

My client opted for a 5 yr fixed rate loan 2 years ago with Suncorp to purchase an investment property with the plan to hold for 5 yrs.
He has now changed his mind and sold it - settlement is in 2 weeks.

Loan amount is $399k and secured against PPOR therefore he has a few options to avoid a break cost of approx $34k.

He will have around $500k to invest and to cover repayments until 2012.

He has in the past placed around $30k in fixed loan and avoided any interest adjustment fees??

Maybe he should try again in intervals....??

Any advice?

Cheers

 

[Rolf Latham]

Hiya

Suncorp policy is tight on extra repayments

If the overall payment made for the month exceeds the standard monthly repayment by more than $500, then an Early Payment Interest Adjustment may apply.

This works ok for small loans, but because the extra repayment is a fixed $ amount and not a % of the loan, it likely wont work for your client.

Unless your client will buy an income producing asset with the proceeds of the loan, he may be best served by taking the bath on the prepayment fee.

ta

rolf