Fixed Loan Break Fees

[josko]

NAB has huge break fee - I am in 2 minds if I should break.
1.4M loan at 8.10% another 3 years to go - Break fee is now ..... 64K if break today . (An expensive lesson for sure !)
What's does your crystal ball say ?
break
break not
break
break not

hI sOYA,

Contracts differ, but generally it works like this.

Firstly, Your break fee is affected by 4 things.

1. Your Loan amount
2. The RBA Cash rate
3. The Fixed Rate you are on
4. How many FR years you have LEFT.

The bigger the difference between the Cash rate and your Fixed Rate - The bigger your break fee.

For example:
If your Fixed rate is 8.10%
If The Cash Rate is 5.25%

The difference is: 2.85%

1.4mil x 2.85%= $39,900
$39,900 x 3 years = $119,700

So- my answer would be NO! You have left it too late, as have I.

Regards JO

 

[ethereal]

Mind if we have some more deail?

Loand $250k ok
When fixed? 3 years in 2008.

Intersted for another person i know... Peter

Fixed in Sept 2007 for 4 years at 7.6%, so around 3 years to go. The std. variable rate (not the cash rate) is/was 7.75% the day I got the quote. It seems like a lot and I don't know how they calculate it, neither did the CBA person, she said 'the computer just works it out automatically'.

We will just hang in there and keep putting up the rent when and if the market will take it.

 

[mags]

Hi Peter I read your post with interest regarding you break fees with CBA.

I am with the CBA also and I had a reply from them on Friday 21st Nov re break costs on a $200,000 fixed loan.

The loan term was for 3 years and started Jan08.
The interest rate 8.49%
The penalty to break out of the fixed rate is $14,300

I will be calling the bank on Monday to ask why my break fee is so high, now that I realize others have significantly lower break fees.

My motto.......If you don't ask you don't get

 

[Peter 14.7]

Hello Mags

Good Luck but i fear your rate is the reason. Even 0.1% doubled the payout on one of my loans from $900 to $1800. I was 7.65% and broke a month ago just before CBA announced drops. I was lucky.

Hard to believe 0.1% makes a diff but it does.

Again, good luck, Peter

 

[Peter 14.7]

Don't these somewhat contradict each other? If you have your loans with the same bank, you're effectively cross-collateralised anyway via the "all monies" clause, aren't you?

Hello.

Dont know about the all monies clause but I have no doubt the fine detail means the Bank owns my first born child, etc... and can effectively do anything.

Being not expressly X coll, as I have set it up, means I can sell any IP on it own and dont have to recalc any other loans for LVR or servicing. On the past I have then all using each other equity and hence it was mess to unwind.

However in the early days this probably was the only way to start. We own our PPOR now so that provides the 20%.

But can the wind me up? Yep I have no doubt. So dont give them any reason to worry i say and being with a larger bank like CBA means they are less twitchcy than a small op.

Peter

 

[Perp]

Being not expressly X coll, as I have set it up, means I can sell any IP on it own and dont have to recalc any other loans for LVR or servicing. On the past I have then all using each other equity and hence it was mess to unwind.

Gotcha, I see what you're saying, and yes, whilst they still have you by the short and curlies if you default, I agree with your sentiment about not giving them anything to worry about. I take your point that this arrangement still has advantages with regard to being able to sell single assets from your portfolio; thanks for highlighting that.

 

[HiEquity]

Dragging up an old thread here but just thought I should relay my experiences when I actually went for this fixed break that was the original post in this thread.

Called the bank a couple of times to get a check on the fixed fee estimate as I couldn't believe the amount at the time (Variable rates were 8.7% and my fix was at 7.29%!). One of the operators told me I couldn't have a new estimate calculated as it was less than a week from when my previous break fee calculation was done.

I said does that mean that the break fee is locked in because I thought the break fee calculation moves daily (which is actually meant to be true). The call centre response was "yes" - you have a week to request the break fee docs and two weeks after that to accept a "locked in" break fee by signing and returning the docs.

So I left it for as long as possible to confirm the direction of the market and then requested the docs, which stated that the break fee was only confirmed on the day you signed and they received them (rates were dropping like a stone at this time and hence break fees escalating quickly). I thought this was a bit rough as I had no idea what the fee would be by the time I signed them.

I therefore raised a complaint saying I had been told one thing and here was another in writing. Complaints dept listened to the tapes and eventually agreed to honour the initial "locked in" break fee estimate, after much tooing and froing.

This particular complaint saved me around $12k in break fees by that time(although I still had to pay $17k on a $860k loan with three years to run). Happy to give Westpac a plug for honouring the promise of their call centre staff! I reckon someone might have been read the riot act...

 

[marg4000]

Good to see that you got an outcome you are happy with.

Bet you will be even happier tomorrow....
Marg

 

[Peter 14.7]

I am stunned any bank would:

1. review thier tapes
2. admit they were wrong

Well done WBC!

A reminder call centre advice is worth the paper it is written on.

Peter 14.7