Just identified a strategy for some owners of IPs with fixed rate loans and thought it worth sharing.
Client has a three year fixed rate loan. Wants to prepay a years interest. Bank must break the 3 year loan to do this (you cant do a years prepaid on a three year fixed rate) and this generates a decent upfront deduction for the breakcost. Then they do the years prepaid which further brings fwd a full year of interest.
Bank is allowing the breakcost to be capitalised over the 12 months too.
Client has a three year fixed rate loan. Wants to prepay a years interest. Bank must break the 3 year loan to do this (you cant do a years prepaid on a three year fixed rate) and this generates a decent upfront deduction for the breakcost. Then they do the years prepaid which further brings fwd a full year of interest.
Bank is allowing the breakcost to be capitalised over the 12 months too.