Fixed Loan Break Fees

[Spectre]

Hi
That propack discount stuff only came into play for special promos and westpac's propack 'normally' only discounts rate. Say right now they're being aggressive though ww/their pricing.

What I was wondering - is if they're recovering the loss of a discount...
For example - $430k x .2% = 860
860 x 3 = 2580

Realsing that its not that simple but...

Also - say rates go down lower... will your cost then become greater or lower?

This reminds me back in the day where people wanted to break from 9.5% to 7.4 and it was going to cost them about $15k to do it...

 

[HiEquity]

What I was wondering - is if they're recovering the loss of a discount...
For example - $430k x .2% = 860
860 x 3 = 2580
......
Also - say rates go down lower... will your cost then become greater or lower?

This reminds me back in the day where people wanted to break from 9.5% to 7.4 and it was going to cost them about $15k to do it...

No discount that I am aware of.

I'm no longer sure with these numbers but if rates go down I suspect the situation will get worse - hence my desire to do this now.

I can imagine going from 9.5% to 7.4% may cost a bit but to go from 7.25% up to 8.7%????? Going from 7.89% up to 8.7% is likely to cost me $17k?????

I just don't get it - my head hurts - think I might have a lie down!

 

[Lukey13]

Worth breaking Suncorp fixed rate?

I just obtained a quote from Suncorp for the fee to break my $330K 5 year fixed loan at 8.69%. Apparently I'm looking at $4K to do this.

I am seriously considering this as an option as I think I'll be on top if rates drop as little as 0.5% (due to 0.7% discount off standard variable). I understand that it is quite likely that rates will drop off far more significantly than that over the next 12-24 months.

My question: What happens to the $4K fee?

Is it capitalised into the loan? Will this incur further LMI if I am already on the brink of LMI territory?

 

[Spectre]

Lukey
think you have to pay it upfront/in line with the break

 

[HiEquity]

Swapping loans an option?

Also, does anyone know whether you can move the fixed rate obligation from one loan to another?

I have a number of loans with Westpac - the fixed ones were for an IP that we now want to make our PPOR (and pay out the loan because it will no longer be deductible - hence the break). We have another variable loan for another IP though. Has anyone ever moved the fixed rate from one loan to the other to do this? Is this even possible?

I'm still stumped why I'm being charged so much for a break when others on much higher rates are hardly getting charged at all! Any thoughts as to how this could possibly be? I can't imagine discounted rates would make that much of a difference?

So many questions I know but any help would be appreciated.

Thanks!

 

[nonrecourse]

Read your loan agreement and never accept that bank charges are always correct

We just recieved the proceeds on friday from a property settlement. It was a RAMS low doc loan that was taken out in 2002 with a variable interest rate that was 1% higher than the going rate at that time. The loan was P&I and on settlement there was $240,000 to pay back. The break fee was in the fine print and even though we have had the loan for 6 years and the interest rate remained 1% above the variable as it was a floating rate we were charged $7000

Lesson learned is never touch low doc loans and read every word before you sign any loan document. We now take all documents away and spend a week-end reviewing them before signing any new loan agreements.

After pestering RAMS/RHG for two days and being told a variety of stories we finally got a refund of $2355. Our contract said that in the first two years the penalty charge for paying out the loan was 1% of the total loan amount. After two years the penalty is one months interest. Interest is charged in arears.

It took two days and a threat to make a formal complaint to the banking ombudsman to make them break down the costs and give us a rational explanation why it was $7000 when our calculations showed it should have been $4645 being the interest in arrears and one months penalty.

I have spoke with a lady whose business went bust and she was forced to sell her home to avoid bankruptcy. RHG charged her $10,000. When asked why she didn't challenge the penalty her attitude was you can't win against the bank

 

[craigb]

NO look smell or sound about it, it is crimminal.

 

[Nathan]

i rang up to get out of a 3month old 3 year fixed with stgeorge from 8.65% to 7.57 and they quoted me $9900 man, my loan is for 160k what a gip?

il just pay the extra interest.

 

[Unit]

Members Equity

I was quoted $600 to break a fixed rate of 7.44% on 250k. Had just under 4 years to run on that rate. I accepted the quote on Tuesday just before the rate cut. Will be paying a bit more to start but am happy to now have the flexibility to sell or benefit from possible low interest rates.

 

[Lukey13]

$18K break fees for Suncorp!

I just obtained a quote from Suncorp for the fee to break my $330K 5 year fixed loan at 8.69%. Apparently I'm looking at $4K to do this.

I am seriously considering this as an option as I think I'll be on top if rates drop as little as 0.5% (due to 0.7% discount off standard variable). I understand that it is quite likely that rates will drop off far more significantly than that over the next 12-24 months.

My question: What happens to the $4K fee?

Is it capitalised into the loan? Will this incur further LMI if I am already on the brink of LMI territory?

Looks like the $4K fee is only for one of the loans against the IP which I have fixed. To do both loans I'm looking at far more - $18K to break $330K fixed at 8.69% for another 4 years.
There's no way that could be worth it when you consider you've got to pay the extra interest on the $18K over 4 years.
Oh well. I guess I won out with the more important non-deductible loan against my PPOR which is still at 6.55%.

 

[BoatBoy]

We just recieved the proceeds on friday from a property settlement. It was a RAMS low doc loan that was taken out in 2002 with a variable interest rate that was 1% higher than the going rate at that time. The loan was P&I and on settlement there was $240,000 to pay back. The break fee was in the fine print and even though we have had the loan for 6 years and the interest rate remained 1% above the variable as it was a floating rate we were charged $7000

Lesson learned is never touch low doc loans and read every word before you sign any loan document. We now take all documents away and spend a week-end reviewing them before signing any new loan agreements.

It was suggested to me by the head guy at a RAMs branch that if selling early we could pay down the loan to say $2000 and transfer security of that $2000 across to another property so as not to incur the $7000 fee.

Sounds good in theory and we have set an unencumbered property aside for this reason.

Sorry, just re read your post and our loan is not fixed and the $7000 was just for settling the loan early as they have some clause that it needs to run for 5 years (I think)

Dave

 

[BoatBoy]

I was quoted $600 to break a fixed rate of 7.44% on 250k. Had just under 4 years to run on that rate. I accepted the quote on Tuesday just before the rate cut. Will be paying a bit more to start but am happy to now have the flexibility to sell or benefit from possible low interest rates.

Thanks for that snippet

We have an ME loan we fixed about 18 months ago and I was wondering if we should consider getting out of it to take advantage of this possible rates back to 4% talk.

At the moment though it is probably already 1.5% lower than standard variable

Dave

 

[josko]

It was suggested to me by the head guy at a RAMs branch that if selling early we could pay down the loan to say $2000 and transfer security of that $2000 across to another property so as not to incur the $7000 fee.

Sounds good in theory and we have set an unencumbered property aside for this reason.

Sorry, just re read your post and our loan is not fixed and the $7000 was just for settling the loan early as they have some clause that it needs to run for 5 years (I think)

Dave

I wonder if that would work with an encumbered property with the same bank? So like a 2nd mortgage but with the same lender?

Regards JO

 

[Diamond-Finance]

Minxdamanx

Do you mind answering,

Was it your choice to fix or were you encouraged to fix by your mortgage broker?

 

[soyabean]

NAB has quoted 54K fees to break a loan of 1.4 M , 3 year left at fixed rate of 8.1%

 

[Peter 14.7]

Hello All

I have mostly always fixed except my PPOR which I paid down ASAP.

I see fixed rates as like an insurance premium. I took 7.65% for five years 12 months ago. Once rates go under that the diff is what the insurance premium is.

However if rates go down my property value goes up. And I could lose it.
FI rates go up my value goes down.

Try that thought, you cannot predict the future and with the pump priming today I fear RBA will not drop rates as much as of yesterday.

Where will rates be in 2012 you should ask?

Peter

 

[jingo]

Hello All

I have mostly always fixed except my PPOR which I paid down ASAP.

I see fixed rates as like an insurance premium. I took 7.65% for five years 12 months ago. Once rates go under that the diff is what the insurance premium is.

However if rates go down my property value goes up. And I could lose it.
FI rates go up my value goes down.

Try that thought, you cannot predict the future and with the pump priming today I fear RBA will not drop rates as much as of yesterday.

Where will rates be in 2012 you should ask?

Peter

Good post Peter,

I am beginning to think along the same lines as you mentioned above. We have the majority of our loans fixed and have staggered the time that the loans mature deliberately as a risk management play. Would hate to have all the loans mature at the same time into a high interest rate environment!

Having said that we have loans on various interest rates ranging from 6.95% up to 8.10%. If rates drop to about 6.89% our portfolio would be neutral. However, the break costs would be substantial - and we would really need to do the sums carefully before we considered breaking.

The type of economic environment we are in at the moment is confusing to say the least. A few short months ago rates were rising and there were fears they could reach 11% or higher! Now, the reverse is true with impending unemployment, asset deflation and goodness knows what else in the wings!

I'm holding on tight for the ride. This year has been interesting to say the least!

Regards Jason.

 

[boomtown]

It was suggested to me by the head guy at a RAMs branch that if selling early we could pay down the loan to say $2000 and transfer security of that $2000 across to another property so as not to incur the $7000 fee.

You extremely clever *******. Problem is that the new financier would come in as a second mortgagee - not sure they will go for that.

 

[Sunfish]

I've never seriously considered fixing loans. Now I think I know why.

I remember it was the "common wisdom" to fix early in the year, but I'm a "manana" type of person. I make no distinction between the work involved in arranging loans and that of running my business. Each hour has a value. Being busy and being productive ain't the same thing.

But that's not why I came here. I was told today by a guy whose wife is a MB that Westpac is offering 15 yr fixed with a six in front of it. That could be tempting if you really were there for the long term. To take this you would need to be very aware that there would likely be a few years when it was above variable, but after that you could be laughing like a big green spider.

Any experts see it that way?

 

[asdf]

I was told today by a guy whose wife is a MB that Westpac is offering 15 yr fixed with a six in front of it.

A period of 10-15 year deflationary environment can't be fully ruled out. I'll attach a very low probability but not impossible nevertheless.