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 JECJEC

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 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 JECJEC

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

 

Life with anxiety

At times, I feel pretty worthless. In those moments, all I want to do is curl up into a ball and hide in the dark. I can try to quiet my mind, but it won?t shut up.

IVF leaves woman pregnant with another couple's twins

An Italian woman has been told the twins she is three months pregnant with are not hers.

'My mother-in-law found out our baby's gender behind our backs'

My husband and I mutually decided that we didn?t want to know our baby's sex before the birth, but his mother couldn't handle that.

What you need for the 'fourth trimester'

In my opinion, the first three months after the birth are the most intense. Here's what got me through that time after welcoming my baby.

Weaning a toddler off a dummy: a 15-day plan

Weaning your child off the dummy can be a traumatic experience for both of you. Here are some tips to help you through.

Choosing to be a solo parent

Two women share their stories of longing for a baby so much that they each decided not to wait for a partner before becoming a mum.

Asphyxia link another piece of the SIDS puzzle

An Australian study has uncovered information which could lead to a better understanding of why babies die from Sudden Infant Death Syndrome.

Rescue dog Zoey and BFF Jasper star in adorable pics

Photographer, self-professed "crazy dog lady" and mum Grace Chon takes photos of rescue dog Zoey and her 10-month-old son Jasper together. The results are just too cute. See more on Instagram @thegracechon.

The ultimate travel stroller: the Mountain Buggy nano

We tried the Mountain Buggy nano and give it an enthusiastic thumbs up. As the ultimate travel stroller, it's practical, has great features, and looks fab, too.

Mum's heartbreak as son dies in road accident

Daly Thomas and her two young sons were walking home from church on Tuesday afternoon. Her youngest son never made it.

New Kate Spade baby bag designs

Don?t adjust your screen: this bright beauty is coming to you in full colour.

Easter gifts for babies, no chocolate in sight!

If this is your little one?s first Easter you might want to mark the occasion with something a little extra special. Here are 10 Easter gift ideas, which won't harm little teeth.

Download now: Essential Kids Activity Finder app

Got bored kids? Quickly find the best activities for kids wherever you are in Australia with the Essential Kids app.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Win the brand new phil&teds vibe

Check out the good looking new release of the Vibe 3 and the Verve 4-wheeler inline strollers. To celebrate their release, we have a Vibe with double kit to give away.

Baby sleep

From birth to one year and beyond, read about baby sleep, soothing techniques, routines, and sleep school experiences.

Easter gifts for babies, no chocolate in sight!

If this is your little one?s first Easter you might want to mark the occasion with something a little extra special. Here are 10 Easter gift ideas, which won't harm little teeth.

7 tips for a kid-free trip, not a guilt trip

Although I?m jumping out of my skin to take my child-free holiday, I?m dreading the goodbye. But I?m determined to make the most of it without tarnishing it with guilt or sadness about leaving the kids.

Itchibubs: clothes for babies and toddlers with eczema

Parents of children who suffer from eczema will know only too well the scratching that occurs around the clock. A new clothing range aims to help make everyone more comfortable.

Ear piercing: what age is best?

What is it that shapes our opinions on what?s an 'appropriate' age for our children to get their ears pierced? Parents share their views on how young is too young when it comes to piercing.

Caring for kids helps grandmothers stay mentally alert

Looking after grandchildren can help grandmothers ward off brain disease - but it's also possible to get too much of a good thing, researchers say.

Why I loved my third home water birth

After two water births at home, I was determined to give birth to my son the same way. I just hoped this birth would be quicker than my last two.

Revealed: 7 ways food marketers try to trick consumers

If you?re confused by food labels, you?re not alone. Next time you?re shopping for food, look out for these seven common labelling tricks.

'My mother-in-law found out our baby's gender behind our backs'

My husband and I mutually decided that we didn?t want to know our baby's sex before the birth, but his mother couldn't handle that.

 

Free Printable Activities

Keeping little hands busy

Free printable acitivity pages like colouring in, cutting, word finders, mazes, maths activities and puzzles.

 
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.