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Fixed Rate Home Loans - Break Cost Fees
What happens if you repay some or all of your Fixed Rate Home Loan early?
When choosing a fixed rate loan you need to know that if you:
- repay the loan, either in full or in part, or
- switch to another fixed or variable interest rate
before the end of the fixed rate term, you may have to pay break costs.
Break costs can be very large and may vary in size from day to day. Before making an early repayment (or varying a fixed interest rate) during a fixed rate term, you should ensure that you have an understanding of the likely Break Cost Fees. South West Credit can give you an estimate of the likely cost, but the actual cost will be determined on the day that the early repayment event occurs.
If you are not sure what that’s all about, read on. You will find out why we charge the cost, how we calculate it and what other options are available to you.
If you still have queries after reading this information, we suggest that you contact your accountant or financial advisor.
Fixed Rate Home Loan
Our Fixed Rate Home Loans are designed to give you interest rate and repayment certainty for a term of up to 5 years (the fixed rate term). So, for the length of your fixed rate term, you will know exactly how much your regular repayments will be and how much interest you’ll pay.
This means you can budget with confidence and know you’re protected against the risk of your interest rate rising during the fixed rate term of your loan.
Can i make extra repayments?
You can make extra payments of up to $20,000 p.a. in excess of normal repayments, after which break costs apply.
If you choose to make additional repayments above this threshold, repay your fixed rate loan (in part or in full) or switch to another fixed or variable interest rate before the
end of your fixed rate period, you may have to pay break costs.
Why do Fixed Rate Home Loans have break costS?
Fixed rate home loans are a contract between you and South West Credit. They give you certainty about your repayments and provide us certainty about the interest we will receive over your fixed rate term. This allows us to make hedging and funding arrangements to match our customers lending needs.
In making these hedging and funding arrangements we incur interest costs. If you repay some or all of your fixed rate loan early or switch to another fixed or variable interest
rate before the end of your fixed rate term, we will need to change our funding arrangements. The Break Cost Fee helps us recover our reasonable estimate of the cost
incurred in changing those funding arrangements.
How does South West Credit calculate the amount of the Break Cost Fees?
The cost isn’t the same for everyone – it’s based on a calculation that takes into account things like:
- the amount that you are paying off or the amount that you switch to another fixed or variable interest rate loan;
- the number of days left on the fixed rate period of your Fixed Rate Loan;
- the amount that market rates1 have moved since the start of the fixed rate period on your Fixed Rate Home Loan.
Further details about how this cost is calculated are contained in the Lending Terms and Conditions issued with your Letter of Offer.
How do I get a quote of the break cost?
If you are considering paying out a fixed rate loan, making additional repayments or switching to a new interest rate, a quote of the break costs can be obtained
by calling our branch on (03) 5560 3900 or by emailing firstname.lastname@example.org.
Please remember that break cost fees can vary DAILY and the actual cost for your loan will be determined on the day that the early repayment event occurs.
What other options are available?
If you’re thinking of applying for a Fixed Rate Home Loan, you need to be sure it’s the right loan for you. If you think you may be able to make additional repayments or wish to
change your loan type or your interest rate prior to the end of the fixed rate term, you may wish to consider:
- choosing a different fixed rate loan term
- choosing a variable interest rate loan
- splitting your loan into 2 portions: a fixed rate portion for repayment certainty and a variable rate portion for greater repayment flexibility. .
Information is key. We recommend you talk to one of our Lending Specialists about your options, to make sure you know all the facts and have all the information you need to make an informed decision. Our Lending Specialists can be contacted on (03) 5560 3900, Monday - Friday, 9am - 5pm. Out of hours appointments are also available.
1 Market rates at the start of the fixed rate period and ‘Market rates at the date of the repayment’ are defined in the Lending Terms and Conditions booklet or issued with your Letter of Offer. All applications for loans are subject to SWC’s normal credit approval criteria. Terms and conditions, fees and charges apply.
Information on this page does not form part of the Terms and Conditions of any loans or other facilities and provides general information current as at the time of production. The information on this page is intended as a guide only; it is not intended to be a substitute for professional advice and should not be relied upon as such.
© 2014 South West Credit Union Co-operative Limited | Warrnambool | ABN 44 087 651 705 | AFSL / Australian Credit Licence 241 258 | BSB 803 073