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 (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 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

 

Special Ticket Offer, Save $8!

The Essential Baby & Toddler Show is back this April! Save $8 off the door price for a limited time only!

Finding baby name inspiration in unusual places

Sometimes the greatest baby name ideas come from the most unexpected places, as these EB members show.

The case for inducing at 37 weeks

While we often think of pregnancy as a 40 week affair, experts agree that 37 weeks is actually “full term". So is there an argument for inducing all births at 37 weeks?

Does controlled crying really work?

Controlled-crying techniques may help some babies sleep through the night, but for many exhausted new parents, it's just a recipe for more tears all round.

How I taught my infant to use a toilet

As people become more aware of these benefits, I hope more parents will practice this method, so we can cut down on nappies and improve baby bonding.

'I thought it was impossible': Emily Symons pregnant at 45

Aussie actress Emily Symons has announced she is pregnant with her first baby.

Shallow water blackout kills fit, healthy dad

A little girl will grow up without her father after the fit and healthy 34-year-old passed away while doing something he had practised his whole life.

Afternoon naps may be bad for toddlers' sleep

You could be doing yourself a disservice by encouraging your toddler to have an afternoon nap, according to new research.

Best gifts for newborns, new mums and christenings

We've compiled a guide to some of the most popular presents for newborns and new mums, and for christenings and naming days.

Jaime King to be a mum again

Actress Jaime King is pregnant with her second child, giving 16-month-old James a sibling.

Nannies should receive government funding

The Abbott government should extend funding to nannies, and direct childcare payments to low and middle income families, a landmark study on childcare has found. 

Common skin irritations in newborns (and how to treat them)

As many as one in two newborn babies suffer from skin irritations in their first few weeks. So what are the most common rashes and irritations to look out for?

10 wall decals for the nursery or playroom

Wall decals are the answer to creating a beautiful nursery or children's space without lifting a paint brush, a spirit level or even a hammer.

Preschooler walks 2.4km home alone

Three-year-old Cain Trainor headed off home after his first day at a new preschool without telling anyone.

Video: Why mums get nothing done

In spite of being in an almost constant state of motion while looking after the kids and trying to keep things together at home, it can seem as though parents have managed to get nothing on the to-do list done by the end of the day.

The middle name game

The middle name is no longer an afterthought, and parents' inspiration comes from many places.

Have a baby or your money back - but there's a catch

A new IVF scheme offers couples the chance to fall pregnant and give birth - or get their money back. But there's more to it than you might think.

A rare glimpse inside the womb

A baby born still inside the amniotic sac gave US doctors a rare glimpse at life inside the womb.

Battered mum forced to write to her attacker ex in jail

Three years ago Jason Hughes viciously attacked his ex-partner. Now she has to write to him three times a year.

Woman pleads not guilty to ultrasound scam

A West Australian woman will fight allegations that she scammed expectant mums by selling them fake ultrasound pictures of babies.

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

Brain damaged mum receives compensation

A Sydney mother who suffered brain damage when she was hit by a car while pushing her newborn baby in a pram has reached a confidential out-of-court settlement with the driver's insurance company.

Indigenous midwives break down the barriers

A culturally sensitive midwifery service has gained the trust and respect of Aboriginal women.

The Katering Show's next big delivery

Most mums-to-be plan to take things easy and perhaps have a little break from work as the birth of their baby draws near. Not Kate McCartney.

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.

Why I have mixed feelings about Cindy Crawford's leaked photo

Last week an un-retouched photo of model Cindy Crawford surfaced, showing the 48-year-old mother-of -two posing in underwear.

How to create a Peppa Pig pancake

Thought your toddler could not love pancakes any more than they already do? How about if the breakfast treat came in the shape of every two-year-old's favourite cartoon character?

'It's a little life, not a little loss': pregnancy after miscarriage

I thought I was never going to be able to have a successful pregnancy. I decided that I wasn't going to form an emotional attachment with this baby.

Bonds Baby Search 2015: what you need to know

February 18 marks the start of one of the most prolific annual baby competitions in Australia: the Bonds Baby Search. And this year is going to be more special than ever.

Who will manage your Facebook account when you're gone?

This is not something that people like to talk about, but Facebook has announced that it will grant users more control over what happens to their pages after they die.

Struggling mum of four wins $188 million

Mother of four Marie Holmes was financially struggling after quitting her jobs at Walmart and McDonald's in order to care for her children.

Pregnant obese women a 'relatively new problem', coroner hears

A first-time mother whose daughter died hours after her frightening birth insists she was never told of the risks of being obese and pregnant.

'I'm angry as hell': the story behind mum's passionate vaccination plea

She has labelled parents who do not vaccinate their children "misinformed imbeciles" - and for that, she makes no apologies.

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.

8 different kinds of tantrums

I never thought I’d say this, but for a brief moment last week, Kim Kardashian and I had something in common: both our kids had public tantrums.

Polycystic ovary syndrome: symptoms, treatment and your fertility

Polycystic ovary syndrome (PCOS) is the most common female hormonal condition, affecting roughly one in 12 Australian women.

What's the best position for giving birth?

If doing it on your back is out, what's the best position for labour and birth?

Wife forgives snake catcher husband for car surprise

With Valentine's Day coming up, Nat Gilbert could be forgiven for thinking her husband might be planning a surprise for her.

Kids who meet milestones at their own pace

We usually only hear the success stories: tales of the two-year-old who’s talking, running and completely toilet trained. But other stories need to be told too.

Ruby shines as Bonds Baby

Sarah Kiss has a word of advice for proud mums and dads who are keen to enter their babies in this year's Bonds Baby Search Competition - just have fun.

Why dads should go to sleep school

If your family needs to go to sleep school, go with them. You are part of that family and you are part of the solution.

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.

 

Win a KitchenAid Mixer

Let's celebrate 300,000 fans on Facebook

To celebrate, and to thank our amazing fans, we?re giving away a KitchenAid Artisan Tilt-Head Stand Mixer.

 
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.