Jump to content

Breaking a fixed loan mortgage
Anyone ever done it?


  • Please log in to reply
13 replies to this topic

#1 clm1982

Posted 05 December 2012 - 07:58 AM

Hi Everyone

Is short we fixed our Mortgages a few years ago for 5 years at the time it was a good idea as rates were very high and wanted piece of mind whilst having kids etc but with the GFC rates have plummetted, and wonder whether we should look into breaking the contract and whether it would be worth it or not.

Mortgage 1 - Approx $160k fixed at 7.89% which runs out July 2013.
Mortgage 2 - Approx $290k fixed at 7.25% which runs out mid 2015

I am aware we may need to pay break out fees of $10-20k? not sure how they work out this info, do we need to speak to the bank or someone else?

Ideally we would like to combine the 2 mortgages but as one only has 6 months left on it im not sure whether thats the right thing to do or not.

Can anyone shed some light?

#2 Bluenomi

Posted 05 December 2012 - 08:19 AM

The bank will be able to tell you how much it will cost to break the fixed term. I suspect with the first one it wouldn't be worth it, the amount you'd pay would be more than the interest saved.

#3 Ally'smum

Posted 05 December 2012 - 08:23 AM

I agree that it probably won't be worth breaking the first one. Can you have an offset account attached to the second one and put savings in there to reduce the dollar amount of interest that you pay, rather than the rate of interest? This might be a cheaper option.

#4 pollyjo

Posted 05 December 2012 - 08:31 AM

Definitely worth speaking to your bank.
We re-did our mortgage last year and it cost us $3000 in fees, but we saved $5000 in the first year in interest so it was worth it!  They just add the fees to the mortgage so you don't have to come up with the cash (or our bank did anyway).
Absolutely worth a phone call or two!

#5 clm1982

Posted 05 December 2012 - 08:40 AM

QUOTE (pollyjo @ 05/12/2012, 09:31 AM) <{POST_SNAPBACK}>
Definitely worth speaking to your bank.
We re-did our mortgage last year and it cost us $3000 in fees, but we saved $5000 in the first year in interest so it was worth it!  They just add the fees to the mortgage so you don't have to come up with the cash (or our bank did anyway).
Absolutely worth a phone call or two!



Yep thats what i was thinking, if the break fees end up being covered by savings then it would be worth it. I was suspecting the first one wouldnt be worth it. Just hope that rates stay down for 6 months.

#6 ShopgirlX

Posted 05 December 2012 - 08:43 AM

Maybe speak to a mortgage broker?  They know all the tricks of the trade and can probably work out an arrangement that will benefit you.  I can recommend an excellent guy if you are in Melbourne.

#7 clm1982

Posted 05 December 2012 - 10:13 AM

Well ive called the bank to calculate the fees, wonder what they come back with, will take a day or two.

#8 CEJCEJ

Posted 05 December 2012 - 10:22 AM

QUOTE (loggedin @ 05/12/2012, 09:23 AM) <{POST_SNAPBACK}>
I agree that it probably won't be worth breaking the first one. Can you have an offset account attached to the second one and put savings in there to reduce the dollar amount of interest that you pay, rather than the rate of interest? This might be a cheaper option.

Generally you can not offset against a fixed rate loan.

#9 Fluster

Posted 05 December 2012 - 10:30 AM

The bad news is that you can't just pay a nominal amount so you can exit a fixed loan and take advantage of lower rates.  The bank has a complicated formula that includes charging you for the difference in income they would receive if you were paying them 8% interest as opposed to 5%. It's not pretty.  Having been in that situation (at 7.79%!), my suggestion is suck it up and wait out the fixed loan period.

#10 giggleandhoot

Posted 05 December 2012 - 10:33 AM

We're in the same boat. Though the Bank didn't tell us we can't use a fixed with an offset account. We really need the offset account as we put our business gst money in there. We'll probably just suck it up and pay for their mistakes..won't be the first time. We have just over a year on ours left..so hope it won't be too much, but it's just not working the way we wanted it too.


#11 (feral)epg

Posted 05 December 2012 - 10:41 AM

Probably worth talking to a mortgage broker or a financial planner. Most of them are nominally independent but take a percentage of whatever loans they organize for you.

#12 clm1982

Posted 05 December 2012 - 03:21 PM

So called the bank, breakout fees would be approx $9500 for both loans and we would be saving that back over the life of the original fixed term loan. In saing that we would save $700 a month in repayments so it certainly seems likely that we will be better off in the short term at least.  biggrin.gif

Thanks everyone for the advise.

#13 CEJCEJ

Posted 05 December 2012 - 03:29 PM

QUOTE (Fluster @ 05/12/2012, 11:30 AM) <{POST_SNAPBACK}>
The bad news is that you can't just pay a nominal amount so you can exit a fixed loan and take advantage of lower rates.  The bank has a complicated formula that includes charging you for the difference in income they would receive if you were paying them 8% interest as opposed to 5%. It's not pretty.  Having been in that situation (at 7.79%!), my suggestion is suck it up and wait out the fixed loan period.


That's because they would normally have a corresponding fixed term loan with an corresponding fixed expense that they will also have to pay out.


QUOTE (giggleandhoot @ 05/12/2012, 11:33 AM) <{POST_SNAPBACK}>
We're in the same boat. Though the Bank didn't tell us we can't use a fixed with an offset account. We really need the offset account as we put our business gst money in there. We'll probably just suck it up and pay for their mistakes..won't be the first time. We have just over a year on ours left..so hope it won't be too much, but it's just not working the way we wanted it too.


Sometimes it is better to have a portion of the loan variable to use an offset account against, especially if you know that there will be funds that build up over time - but you would still have the risk on that portion of the loan with upward rate movements.

#14 giggleandhoot

Posted 05 December 2012 - 09:34 PM

I think that was around the price we were told when we told them we wanted to change banks. I'm heading in next week to talk to them.


Sometimes it is better to have a portion of the loan variable to use an offset account against, especially if you know that there will be funds that build up over time - but you would still have the risk on that portion of the loan with upward rate movements.

I hope we just get someone who knows, I think we're the dumping ground for bad bankers in our town..if they last more than a 2 weeks!





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

Show us your DUPLO creations to win!

We love to see the cool creations kids build when they play with LEGO DUPLO. Enter and share a picture of your childs creation for a chance to WIN 1 of 10 LEGO DUPLO prize packs worth over $100 each.

Jammy, Hula Hoop, Rage: Reddit reveals most unusual baby names

A recent Reddit thread has revealed some of the more creative names in the world.

Woman awakens from coma, learns she gave birth

A US woman awakened this week from a four-month-long coma that doctors had feared would be permanent and learned that she had given birth to a baby boy, according to her family.

'Give us a break': mum sent shocking letter over Facebook baby pics

Posting a lot of baby photos doesn't make you a bad person. It may make your Facebook feed a little irritating, but it doesn't make you a bad person.

In defense of the dads who do so much

It's time to shift the focus off what dads aren’t doing and shine it on what they are.

The modern cloth nappies too cute to cover up

If you're only just joining the modern cloth nappy movement, or would like to spruce up your collection, we have to introduce you to Designer Bums.

How breastfeeding can affect your libido

When you’ve just had a baby, having sex isn’t usually top priority. In fact, for a lot of women it rates about as appealing as changing another dirty nappy.

Should pregnant women be allowed to use 'parent and child' car parking spots?

Is it acceptable to use these car parking spots when pregnant? How many of us would admit to doing it?

Healthy baby from sperm taken 48 hours after a man died

Fertility doctors have described their "most extraordinary case" - creating a healthy baby from sperm taken 48 hours after a man had died.

Anti-vaccination mum's seven children contract whooping cough

A Canadian woman who had declined to have her children immunised against pertussis, better known as whooping cough, has changed her position now that all seven of her children have come down with the disease.

How pregnancy probiotics can help you and your baby

New research suggests that taking specific pregnancy probiotics could be the answer to a range of common pregnancy side effects.

Childcare is a big problem, but there's more to it

Let’s keep talking about these issues and not allow them to be put into a neat little box that’s labelled ‘Fix childcare and everything is solved’.

Pink's awesome response to body-shaming trolls

When trolls felt the need to comment on 35-year-old singer-songwriter Pink's weight, her answer was an awesome ode to body love.

Fertility clinic offers egg donors $5000

A national chain of fertility clinics is offering egg donors a $5000 payment to cover their expenses, a first for Australia which is raising concerns the money could act as an inducement.

Baby boy abandoned in India amid fresh surrogacy concerns

Australian officials could do nothing to stop an Australian couple from abandoning their baby son, born through surrogacy in India, after they decided they did not want to bring him to Australia.

Herd immunity and community responsibility: how free-riders can make kids suffer

Individual choice works for haircuts and handbags, but not for preventing infectious diseases that kill kids.

Photographer captures 'unexpected beauty' of birth

If there is one thing Leilani Rogers knows about childbirth, it is that no two deliveries are ever the same.

Expectations vs the reality of making a toddler's clothes

Note to self: less sewing, more life. Not the party dress, but the party. The toddler, as usual, has it all figured out.

Mum meets 'dead' daughter 49 years after birth

In 1965, Zella Jackson-Price was told her premature baby girl had died shortly after birth.

Sign up to our 30 days of #PlayIQ challenge

Sign up to receive 30 amazing tips and ideas for play with baby during the month of April and submit a picture or tip on our social wall for a chance to win an amazing Fisher-Price prize pack.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Sign up to our 30 days of #PlayIQ challenge

Sign up to receive 30 amazing tips and ideas for play with baby during the month of April and submit a picture or tip on our social wall for a chance to win an amazing Fisher-Price prize pack.

Tips for flying with a baby

Travelling with kids requires a whole other set of skills - ones that I have learned through (sometimes unfortunate) trial and error.

How to stay calm in an emergency

I’m not expecting you to be as calm as you might be right now. What I mean is that if your panic levels are through the roof during a stressful situation, let’s bring them down to just under the ceiling.

Toddler gets 'drunk' after cranberry juice mix-up

A toddler was taken to hospital after a waitress served her sangria instead of cranberry juice at a US restaurant.

Show us your toddlers LEGO DUPLO creations

We love to see the cool creations kids build when they play with LEGO DUPLO. Enter and share a picture of your childs creation for a chance to WIN 1 of 10 LEGO DUPLO prize packs worth over $100 each.

We need to stop using this word when we talk about childbirth

Is it shaming to point out that women are often being let down in birth?

The certificate helping parents deal with pregnancy loss

For some people, this certificate will offer a sense of validation that their child was acknowledged as being here and now gone, and will help them with life post-loss.

The phenomenon of phantom pregnancy kicks

'Phantom pregnancy kicks’ are encountered by many mums months - or even years - after their pregnancy is over.

The health insurance advice you can't afford to ignore

There's one simple switch that could save you hundreds of dollars a year in private health insurance.

4D scans show how smoking affects babies still in the womb

The harmful effects of smoking during pregnancy on unborn babies may be seen in tiny movements in their faces using 4D ultrasound scans, research has found.

The most dangerous toddler food trends

Pete Evans' paleo cookbook for kids caused a storm, but there are plenty of other unsafe food trends for babies and toddlers.

Infection killed new mum of twins

Modern medicine could not save 19-year-old Sophie Burgess who died 48 hours after giving birth to twins in the UK.

How to babyproof your job interview

Once upon a time, I was a fan of job interviews. That all changed after I'd switched careers, had a baby and decided to spend the first year at home with her.

Grieving families give warnings after toddler deaths

Two Queensland families are grieving the loss of their toddler sons after the boys drowned in separate incidents last week.

Man faces jail after giving woman abortion pill smoothie

A Norwegian man is facing jail after putting abortion pills in his ex-girlfriend's smoothie, causing her to have a miscarriage.

'He's a blessing': family of baby born without eyes

Jordy Jackson was born without eyes. He has anophthalmia, which affects one in every 100,000 babies born.

Super fit model Sarah Stage defends her pregnancy body

Model Sarah Stage has defended her pregnancy body after critics claimed her slim figure at eight-and-a-half months pregnant wasn't "normal".

Why I post breastfeeding photos online

I love to take pictures of my children. In some of the pictures, my younger son is nursing.

The day I broke my baby

There are things I wish I didn't know. I wish I didn't know that companies make tiny braces, small enough to hold necks no bigger than a wrist.

Geeky baby gear

If your family is more into Star Wars, gaming and the periodic table than most, you might want to check out these geek-chic baby items.

Grandbabies: the babies born looking old

Not a day under 65 and a lifetime of struggle! That's the look of these newborns, who look adorably older than their real age. Social networking site Reddit recently featured user submissions of adorable grandbabies, here are our favourites.

53 creative pregnancy announcements

Announcing that you're expecting can be a time to express your creativity, sense of humour and imagination. Check out how other parents and parents-to-be have broken the news to friends and family.

IKEA hacks for the nursery and kids' rooms

Are you one of those that know the whole IKEA catalogue by heart? Love their stuff but want to personalise it? Here's some inspiration to help you realise the potential of IKEA furniture and fittings.

36 baby names inspired by food and drinks

A French court may have ruled out Nutella as a baby name, but that doesn't have to stop you from taking inspiration from the supermarket (or bottle shop). See what parents in the US have chosen for their delicious little ones.

Clever breastfeeding products

Check out this range of products designed to help make your breastfeeding journey more enjoyable, manageable and convenient.

 

SIGN UP NOW!

Win a year's worth of toys

Receive a daily email from Essential Baby for just the month of April with great play tips and ideas, then submit your baby at play photos to our Playwall, Instagram or Twitter for your chance to win.

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.