Hi guys
In February last year I fixed my $348k investment property loan with NAB at 5.9% for 2 years, paying interest only. So the loan has about 1 year to run during the fixed interest period.
Out of interest, I emailed my direct banker at NAB to ask them what the break fee would be if I wanted to revert to a variable rate. They said it would be $5,600 which I was surprised at.
I always thought the break fee represented the difference between funding costs for the bank at the time I took out the fixed rate vs now. Given current fixed rates are around ~5%, I was thinking a good proxy for the break cost would be more like 0.90% times $348k (ie 1 year of the difference between my fixed rate and current fixed rates) which equals $3000. I know that it is not a precise guess but that was my back of the envelope.
What am I missing between the NAB estimate and my own?
In February last year I fixed my $348k investment property loan with NAB at 5.9% for 2 years, paying interest only. So the loan has about 1 year to run during the fixed interest period.
Out of interest, I emailed my direct banker at NAB to ask them what the break fee would be if I wanted to revert to a variable rate. They said it would be $5,600 which I was surprised at.
I always thought the break fee represented the difference between funding costs for the bank at the time I took out the fixed rate vs now. Given current fixed rates are around ~5%, I was thinking a good proxy for the break cost would be more like 0.90% times $348k (ie 1 year of the difference between my fixed rate and current fixed rates) which equals $3000. I know that it is not a precise guess but that was my back of the envelope.
What am I missing between the NAB estimate and my own?