Fixed Rate

[rabidz]

Hi,

Just want to make sure that my understanding is correct.
I fixed my home loan for 5 years at 5.59%
Say, in 3 years time, the 5 years fixed rate is 6.99%
If I want to break this in 3 years time, I don't have to pay break-cost fee, since the rate is higher (6.99%) than my initial rate (5.59%).

Can someone please confirm that this is right?
Thankss..

 

[jonmardell]

not exactly but it is a good indication. At the time you break the contract it would be the difference in the lenders funds at the time you took out the loan and the day you break it. I have done some breaks recently which has not cost anything even though the rates have gone down. If you have a remote possibility that you might need to break i would not do it, just fix for a lower term.

Hi,

Just want to make sure that my understanding is correct.
I fixed my home loan for 5 years at 5.59%
Say, in 3 years time, the 5 years fixed rate is 6.99%
If I want to break this in 3 years time, I don't have to pay break-cost fee, since the rate is higher (6.99%) than my initial rate (5.59%).

Can someone please confirm that this is right?
Thankss..

 

[rabidz]

not exactly but it is a good indication. At the time you break the contract it would be the difference in the lenders funds at the time you took out the loan and the day you break it. I have done some breaks recently which has not cost anything even though the rates have gone down. If you have a remote possibility that you might need to break i would not do it, just fix for a lower term.

Thanks jonmardell.

How do we know the difference in the lenders funds at the time I took out the loan and the day I break it? Is this something I can easily know (without asking the lender)?

Is this common practice? I've read the pds of my lender and it just stated that the break cost is the difference between the original rate & the current rate. They also give example, but unfortunately the example is always when the current rate is lower than the original rate.

 

[jonmardell]

Thanks jonmardell.

How do we know the difference in the lenders funds at the time I took out the loan and the day I break it? Is this something I can easily know (without asking the lender)?

Is this common practice? I've read the pds of my lender and it just stated that the break cost is the difference between the original rate & the current rate. They also give example, but unfortunately the example is always when the current rate is lower than the original rate.

the only way is by getting a break cost quote through your broker or lender. For most banks it is a quick phone call.