Fixed loan break costs ??

[devo76]

Hi all.
I have a $250,000 loan fixed at 7.25% about to finish in 2.5 months.
I asked how much the break costs would be to change this to 5.99% as offered to me on another loan.
$1,450 !!!!
Is this normal. It's a standard $300 fee plus $1,150 on top.
Now to me the amount the bank would be out of pocket going from 7.25 to 5.99 for 2.5 months would only be around $650 so with the standard $300 I would have expected around $950 total break costs.
Why the extra ?
What are other peoples expierience with breaking close to the end date.
Truth is the cost should be deductible and I'll make it back in savings over a few months . Just interested in what others pay.
Cheers

 

[Rolf Latham]

Hi all.
I have a $250,000 loan fixed at 7.25% about to finish in 2.5 months.
I asked how much the break costs would be to change this to 5.99% as offered to me on another loan.
$1,450 !!!!
Is this normal. It's a standard $300 fee plus $1,150 on top.
Now to me the amount the bank would be out of pocket going from 7.25 to 5.99 for 2.5 months would only be around $650 so with the standard $300 I would have expected around $950 total break costs.
Why the extra ?
What are other peoples expierience with breaking close to the end date.
Truth is the cost should be deductible and I'll make it back in savings over a few months . Just interested in what others pay.
Cheers

the funding cost they are losing isnt the spread between the 7.25 and the 5.99.

Its based around what your lender PAID to their funder, and they are contractually locked in on that rate plus their margin.

ta

rolf

 

[evan1875]

I have 2 loans fixed at 7.1%.. I still have not had the courage to ask my bank what it would cost to break these. 2 years to go.

I paid a rate locking fee during settlement period as well because I believed the hype of further interest rate hikes.

Don't worry you are not alone. I personally would not fix my loans again in the future for flexibility.

It is costly education but education nevertheless.

Rofl was very helpful with my finances in the past year.

 

[Ajax]

I asked RAMS on 27 February 2012 for break costs on a 150k fixed loan (at 6.99% fixed till Sept 2014).

Fixed rate unwind adjustment $4,477

Fixed rate early temination fee $150

Using my simplistic logic they can only lend these monies out (which are already funded) at 5.99% for the next 2.5 years so they have lost about 1% a year interest which on a 150k loan over 2.5 years is about $4,477).

As to fixing again...next time I would think a lot more carefully about when I might be selling the property and maybe only fix on a property I intended to hold for many years.

 

[Terryw]

I know someone that paid $90,000 to break a loan!

If its an investment loan then the break fee should be deductible in the year incurred too which lessens the hurt.

 

[devo76]

Break costs have dropped another $150 in the last 4 days.
I'm thinking I will ring Monday and run the numbers again. If they can still do 3 years at 5.99 and drop the break costs a little more. I'll do it.
It gives me certainty plus I have a second smaller variable loan attached to the property that maintains my flexibility.

 

[buzzlightyear]

Break costs have dropped another $150 in the last 4 days.
I'm thinking I will ring Monday and run the numbers again. If they can still do 3 years at 5.99 and drop the break costs a little more. I'll do it.
It gives me certainty plus I have a second smaller variable loan attached to the property that maintains my flexibility.

Very few banks & smaller banks have 5.99 for 3 years now. I know AMP still have it, but none of the big 4, and fixed rates are heading north. If you have to refi, then you will in all likelihood need a rate lock. Of course a refi at the same institution is mostly easy, except for the ANZ

 

[devo76]

I had the offer on the table Friday so hopefully it's still on offer Monday. Although a lot can happen over a weekend.

 

[Rolf Latham]

Very few banks & smaller banks have 5.99 for 3 years now. I know AMP still have it, but none of the big 4, and fixed rates are heading north. If you have to refi, then you will in all likelihood need a rate lock. Of course a refi at the same institution is mostly easy, except for the ANZ

The reason that its hard at anz is that they do treat it as a refi....... most other lenders like wBC for eg its a simple switch. Some lenderw are in between

Anz treat the switch like a new client coming in from scratch..

Ta

Rolf

 

[belleran]

How can you put pressure on broker and bank to get the loan through as quickly as possible - specificcally ANZ?

 

[Aaron_C]

How can you put pressure on broker and bank to get the loan through as quickly as possible - specificcally ANZ?

Sometimes the wheels turn slowly inside the Big Banking Machine...not much you can do

 

[Spectre]

Belleran
my experience is the broker would like it over and done with asap as well. Currently to us it is quite the case that the lenders back office is stuffing up and delaying over questions they already know the answers to.

We had a lot of massive delays with westpac a while ago - the bdm rang me and said his hands were tied and the best possible resolution was for the client to get online and lodge a formal complaint thru the web.

St george last week took a threat to go to the ombudsman to come good and make a progress payment to the builder after holding the invoices for 3 weeks and just not paying.

Amazing the response it got... perhaps ANZ in your case these courses may assist. However currently we're getting very good turn arounds from ANZ. 3-12 hours unconditional in some cases - normal turnarounds is maybe 3-5 days depending on the deal and who has to sign it off.

More the issue is where there is a further request from the lender which then blows the timeline out another 48 hours or so.

Side issues of being in India sometimes impact too.

But as I said at the beginning the broker would like it over and done asap as well.