Rang bank yesterday. They said $14k to leave! Is this normal? If i knew it was this much I would have never fixed. Thought it was $2k-3k.
Fee for Leaving Fixed Rate Loan
Gerry H on 04/07/2019 - 11:07
Last edited 04/07/2019 - 11:50 by 1 other user
Last edited 04/07/2019 - 11:50 by 1 other user
Comments
thanks
It says it's not a set fee. They work it out with your current rate vs fixed rate & the duration of the loan. additionally, you will be charged another few hundred for early exit fee.
When you are going into a fixed rate deal, you are actually gambling against the bank and the market.
You locked in your interest believing rates would go up, they didn't.
Now you want to get out of the contract and think penalties are harsh?
This proves you didn't read what you were signing, what did you think the break fees were going to be $100 cancellation fee?
Think of it this way….if the rates had gone up and the Bank called you to say they are losing money on your deal and want to cancel the fixed rate contract….and they want to give you a $100 JB hifi voucher….would that fly?
LOL
not just that. didnt know about super cheap loaners like athena. i knew about cheap loaners before but also knew they jack rates after ur in. athena has a policy where new customers are charged same rate as old.
live & learn. You'll know for next time.
If it makes you feel any better your not alone!
I did it in the advice of a broker and it's been a lesson learnt.
I like how tsunami put it "gamble" we just didn't see it like that at the time.
Its defiantly not as bad when people locked in 6% and the rates dropped!same, listened to my broker and didn't bother research, was afraid of cheap small loaners' honeymoon period and excessive exit fee. then recently saw athena and after this month's cut i freaked out.
It all depends on if your happy with the rate at the time.
I recall locking mine at 5.7% 5 years ago. At the time I was happy to do so as me and MSO were expecting. We would be dropping one income. Things would be tight. While it would be great if rates went down we would struggle if they went up.
In hindsight you should just take variable and or refinance as banks have more expertise then you and are not likely to lose out with their fixed rate.
Not exactly, but break fees are roughly calculated as Loan Amount x Time Remaining on Fixed Rate x Difference in rates when you fixed and today
i.e. if your loan is $500,000, you took out a 5 year fixed rate at 4.50% 2 years ago, and there are now 3 years remaining on your loan and current 3 year fixed rates are 3% your break fee will be: $500,000 * 3 * (4.50% - 3%) = $22,500
2 years ago nearly all economists would have told you rates are on the way up, but with the benefit of hindsight we now all know they have only moved down.
If rates had gone up, you would have felt like a genius gloating to all your friends about how smart you were to fix your mortgage.
This is giving me flashbacks to the 2008 GFC.
Where people fixed loans above 9% only to see it fall to 5% in such a short time. Your experience was all over the News and TV back then too, I'm sorry to say.Good to know I'm not the only one regretting locking in a fixed rate. I think mine is 3.8% for another 18 months so not that bad.
What is your loan locked in at and for how long?
I'm on 3.99 and only 2 years in on a 5 year fixed. Mine was quoted at $7500 around 2 months ago.
I wanted to use the equity in it to buy, but can't justify that much. Back to saving for a deposit!
I wanted to use the equity in it to buy
mind to elaborate how?
most big banks allow you to tap into the equity to purchase another property without touching your existing loan. just do it as a new loan or a side loan. in short you dont need to break the fixed rate term to get further lending
The calculation is different at every bank, but as others have noted is effectively a function of your loan amount, the time left on the fixed term and the interest rate differential between your fixed rate and the variable rate.
What does your loan doc that you've SIGNED & AGREED on, says ?