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Breaking Home loan fixed rate

Discussion in 'Property Finance' started by Sam_Sydney, 30th Oct, 2015.

  1. Sam_Sydney

    Sam_Sydney New Member

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    Hi All,

    I am happy to mark my post in Property chat forum.

    Last year, my partner and I bought a property and took a home loan jointly. Things didn’t work out well and my name is likely to be removed from both home loan and property.

    When we entered into home loan, we entered into 5 year fixed home loan which ends in the year 2019. When I contacted the bank, they advised that I need to close the loan and reapply for new home loan. However, to break the fixed home loan, there is a break/economic cost close to $10,000 as of now which is a large sum to pay.

    Can you please advise is there any alternate ways of breaking the fixed home loan without cost or minimal cost and entering into new home loan.

    Thanks,

    Sam.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Not much you can do unfortunately. You entered into a contract to repay a certain interest rate for a specific period of time, the bank expects you to honour that contract. The paperwork you signed would have outlined the consequences of breaking the contract.

    About the only thing you can do to avoid the break costs is to not change the loan until the fixed period expires. This means you both would continue to be responsible for the loan until then.

    You can do things like change the security, but it still leaves both of you on the loan, which isn't very helpful in a separation scenario.

    For what it's worth, there are a few lenders that will remove one person from a fixed rate loan in the case of a separation, but most don't.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    legallyblonde likes this.
  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi Sam

    Sorry to hear.

    I *think* some banks might waive the cost if you stick with them for the internal refi. Perhaps call back up and see if you can get further advice.

    cheers

    Jamie
     
    legallyblonde likes this.
  5. Barny

    Barny Well-Known Member

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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    lender is ?

    ta
    rolf
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    If market rates are higher than your fixed rate, it is possible that you'll only have to pay a processing fee, but it's a little tricky to predict if the difference is only a small one.

    Whilst lenders do disclose how they calculate break fees, the figures used in those calculations aren't actually disclosed in their documentation and some of those figures can change from one day to the next. The only way to calculate the break cost is to ask the lender directly.
     
  8. Barny

    Barny Well-Known Member

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    Cheers.

    I'm in that scenario now, cost to break is about 1100 as advised, as of last week. It's not much but would rather not pay it if could. I think rates are bout to move again or just did. They won't wave the fee as I'm paying off the loan.

    Thanks for the feedback.
     
  9. Waterboy

    Waterboy Well-Known Member

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    Can you just leave the loan as it is and then make a Side Agreement with your ex that you will not pay and you have no other rights blah blah blah? Lawyer up?
     
  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Probably won't help if the ex doesn't pay, the bank will still hold both parties responsible. Their agreement came first.

    I have seen some people do this successfully, but it's putting a fair bit of faith in the other party.