Nila Sweeney

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.”

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan