Can break fee be capitalised?

Hi,

Breaking out from fixed rate loan, how break fee is paid? Is it added to loan amount so that new loan amount is now bigger?

What happens on refinance? Does payout figure include initial loan amount + discharge fee + break fee?

Or do I have to pay those fee from my pocket as cash?

 

If you're refinancing you will need do make sure the new loan size is large enough to accommodate the break cost and treat it as an equity release / cash out. Also need to make sure there is enough equity in the security.

 

Depends how the loan is set up. Break costs can vary, so even if the loan was originally set up to cover break costs, the reality is that if the rates drop during the application process, you may still have to contribute funds to settle.

 

Yes you can borrow for it and it could be deductible

 

Thanks @Terry_w It is deductible only if refinancing IP loan. But if refinancing home loan it is not deductible. Is that right?

 

The USE of the borrowed money is the key test. Not what security is used. You need to consider how the funds were all used originally and not consider what the present property use is. If the home loan was used to fund IP depoits then it could be deductible in whole or in part.