Break Cost Opportunity

From: John P


I had earlier fixed a large part of one of my loans with Wizard. (This was early last year when rates had gone up about 4 times in about a month and a half.(or was it the year before??)..... Anyway my question is, with rates as they are and the likelihood of another rate drop, I'm considering paying out the breakcost. I have'nt done the maths yet so I still don't know if it's that cost effective but here's a thought that I am entertaining and I would like your thoughts on it.

Given the level of competition between the lenders, do you think that another lender would be prepared to absorb the breakcost (Approx $10,000) if I were to re-finance with them?? ....or at least part of it???

Has anyone heard of this happening before??

I know it's far fetched, but having said that there have been similar instances in the past where I ended up asking anyway and was pleasantly surprised. Maybe there is another option?? I would love to hear your thoughts on this.

Thanx John
 
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Reply: 1
From: Cathy Baxter


John

We have done exactly this on commercial property. New lenders paying break costs, fees, mortgage broker fees & stamp duty as well as paying out high interest rate fixed loan.

But LVR is less than 60%. All subject to valuation.

Cathy
 
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Reply: 2
From: Rolf Latham


Hi John

A fixed rate loan is basically an insurance policy. Rate risk Insurance.


By breaking the loan you will pay all the difference between the rate you fixed at and the rate for the same product today.

So unless you are willing to punt on a variable rate, breaking to move to a lower fixed rate does not pay in most circumstances.

As far as lenders absorbing someone else;s costs, unlikely. If you want to go the break and variable route, find yourself a good independent broker, they may trade some commission with you.

Ta

Rolf
 
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Reply: 1.1
From: Rolf Latham


Go Cathy

Sounds like a really good deal. There you go John, it can be done with commercial at least, so much for my unlikely :eek:)

Ps I forgot to add to the last post that securitised lenders like Wizard Rams etc, usually have higher fixed rates than normal bank lenders, largely due to how they source their cash.

Ta


Rolf
 
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Reply: 2.1
From: John P


Hi Cathy and Rolf, well I must say I am surprised. Surprised because I got 2/3 replies within about 3 hours of posting...Surprised because of Cathy's response (very encouraging)....and surprised because I did'nt know that lenders like Wizard usually have higher fixed rates because of the manner in which they source their funds.

As Big Kev would say ..."I'm Excited!!"
 
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