Early Repayment Fee in excess of $6600!!

[davemgraham]

Hi All,

I have looked into refinancing to a cheaper loan. I'm currently on a 7.42% variable rate since Dec 2008 (yes it's about 1% more than it should be!).

The "Early Repayment Fees" would be $6,656.00 = to 1.3% of original loan amount.

I understand break costs for Fixed Rate loans, but this is variable.

Under s 72(4) of the Uniform Consumer Credit Code (UCCC) it states,

"A fee or charge payable on early termination of the contract or a
prepayment of an amount under the credit contract is unconscionable
if and only if it appears to the Court that it exceeds a reasonable
estimate of the credit provider’s loss arising from the early termination
or prepayment, including the credit provider’s average reasonable
administrative costs in respect of such a termination or prepayment.


Has anyone attempted to fight these charges before on the grounds that they exceed reasonable estimate of the credit provider's loss ??

Thanks in advance....

Dave

 

[Ausprop]

$6k isn't too bad for an exit - try stomaching close to $50k (on a variable), the alternative being stiffed by them at 10.5%

 

[Sheryn]

Dave

The break fee on one of our variable loans with a Credit Union was 3K, just recently that has been reduced to basically costs incurred.

Is your Lender a bank, credit union or ?


Cheers
Sheryn

 

[davemgraham]

$6k isn't too bad for an exit - try stomaching close to $50k (on a variable), the alternative being stiffed by them at 10.5%

Ok....I'm happy with $6k !!

Is your Lender a bank, credit union or ?

It's a bank - ING.

 

[The Y-man]

Dave,

Is the loan for a PPOR or IP?

Not sure if UCCC covers your IP loan contract.

The Y-man

 

[tobe]

ING, and Low Doc?
And you can get a better rate cause now you have better financials?
Have you tried doing a variation to full doc with ING? that way you avoid low doc break costs, and then the new full doc loan contract will have much nicer break fees and itnerest rate....

 

[davemgraham]

Dave,
Is the loan for a PPOR or IP?

It's PPOR.

ING, and Low Doc?
And you can get a better rate cause now you have better financials?
Have you tried doing a variation to full doc with ING? that way you avoid low doc break costs, and then the new full doc loan contract will have much nicer break fees and itnerest rate....

Interesting idea....I'll remember that one tobe....but it's an ING Full Doc LOC.

 

[tobe]

hmm, and you want a LOC with another lender at a cheaper rate?

Otherswise you could investigate changing over to their other products and see if they give you the same break fee. If they dont, then you could refinance, in two steps, (one variation fo product with ING,a nd then a refi to another lender) and avoid a lot of the cost.

 

[davemgraham]

hmm, and you want a LOC with another lender at a cheaper rate?

Otherswise you could investigate changing over to their other products and see if they give you the same break fee. If they dont, then you could refinance, in two steps, (one variation fo product with ING,a nd then a refi to another lender) and avoid a lot of the cost.

No, I want to refinance to another loan (not a LOC) and pull out some equity at the same time for the next IP.

I'll investigate that option though...thanks !

 

[davemgraham]

hmm, and you want a LOC with another lender at a cheaper rate?

Otherswise you could investigate changing over to their other products and see if they give you the same break fee. If they dont, then you could refinance, in two steps, (one variation fo product with ING,a nd then a refi to another lender) and avoid a lot of the cost.

Just been thinking about this .....If I do this now after 1 July 2010, will that be covered by the National Credit Act and could that be in my favour?

 

[Rolf Latham]

Hi

I have to butt in here.

What is on the loan contract in terms of the deferred estbalishment fee ?

1.3 % for ING direct seems just bit on the high side.

ta
rolf

 

[bcoombs]

Yes does seem a bit high for ING. Depends on the initial loan interest rate and commission paid out. 1st July you are covered for new loans unless in company name, however laws on DEF fees are not concrete yet.

However.......

Id go see a broker and they can do the numbers/affordability for your next purchase. Once you have a contract subject to finance the broker can sort it out for you. Getting your cashout for purchase and a better loan. ( depending on the brokers relationship with ING BDM ). I have generally found this to work out ok for the client.

 

[Indulgedbelle]

Hi, I am just refinancing from Rams, i had a fee of 1% (3rd) year into my loan. I rang Rams on Friday They have changed their fee structure post July 1st. I asked for it in witing , which they have also provided. My exit fee went from being $10,000 to $600. Perhaps you could call your bank and question them about any changes.

 

[davemgraham]

What is on the loan contract in terms of the deferred estbalishment fee ?
1.3 % for ING direct seems just bit on the high side.

Rolf, I'll check tonight.

I don't have any issues in paying it.....I signed the agreement. I just wondered if anyone had successfully challenged these fees before

 

[davemgraham]

Hi, I am just refinancing from Rams, i had a fee of 1% (3rd) year into my loan. I rang Rams on Friday They have changed their fee structure post July 1st. I asked for it in witing , which they have also provided. My exit fee went from being $10,000 to $600. Perhaps you could call your bank and question them about any changes.

Was yours a fixed or variable loan?

 

[Hulkster]

We were quoted $93k break fee on Commercial Loan with 2 years to run

 

[davemgraham]

1.3 % for ING direct seems just bit on the high side.

First Year 1.6%
Second Year 1.3%
Third Year 1.00%
Fourth Year 0.7%
Fifth Year 0.4%

 

[Ranners]

It is possible to dispute an exit fee:

In 2009, a family called Broadfoot took RHG (the former owner of RAMS) to the Consumer Trader and Tenancy Tribunal of NSW to dispute an exit fee of $4,487. The exit fee was annulled because RHG couldn’t provide a reasonable estimate of loss which would justify the fee.

Most lender’s claim that exit fees cover them for costs incurred setting up and discharging a loan. The Tribunal’s decision made it clear that in the future they had better be prepared to justify those costs.

 

[Rolf Latham]

First Year 1.6%
Second Year 1.3%
Third Year 1.00%
Fourth Year 0.7%
Fifth Year 0.4%

Hiya

Are u positive this isnt some mortgage managed/ white label product wholesale with using bulk ING funds ?

Did u pay an LMI premium at the time of taking the loan out ?

ta
rolf

 

[Rolf Latham]

It is possible to dispute an exit fee:

RHG is the current name for the OLD RAMS, rather than the other way round.

That case from the looks was badly represented on behalf of RHGs case.

The basic cost to a lender like the OLD rams of establishing a loan might be around 1200 fixed cost and a variable cost of .6 to 1.2 % depending on the size of the loan

ta
rolf