Question: I’ve taken a $500,000 fixed loan for three years at 8.50%. I want to get out of it but still have another two years before the fixed term ends. Can I get out of this loan without incurring a break fee? Josh
Answer: We asked Miriam Agnos from Smartline for clarification:
“This has become a very common question in the past six to eight months, given the very low interest rates available. Unfortunately, the answer is no. Lenders don’t waive break fees when borrowers exit a fixed rate loan early.
When your $500,000 loan settled, the lender factored in a profit over three years. This profit is the difference between what they bought your funds at and the 8.50% pa they’ll charge you during that time. If you exit early, they miss out on that profit, and hence they charge a ‘break fee’.
Your loan manager or mortgage broker should be able to work out if it’s worthwhile exiting your current home loan and taking a lower interest rate loan (and paying the break fee). In my experience as a mortgage broker, this is rarely the case as the exit fee to break a fixed rate is usually thousands of dollars.”
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now