IP to OO Mortgage Change

Hi all,

I currently have a fixed IP loan from CBA. It is a 3-year fixed that we are less than a year into and the rate is 3.99. Circumstances have changed and we are going to move into this property now at the end of the year. As we wanted to do the right thing, we called CBA and told them about the plans and they said that we would need to break out and then start a new loan. The first time I called they said the cost on that day would be 0, the 2nd time I called it was 2800. Each time I have spoken to them I asked them what the implications are of not changing. They couldn't give me a straight answer except that you might pay more. They also said that some people just stay in the IP loan even if their circumstances change. But my question is: Do you have to change out? There is nothing in the loan documents which mentions this and what the implications are. And, if the costs are more than the money you would save by switching to a fixed rate, and there are no implications, why would you do it?

 

There is no reason to do so - no one cares. Usually a rate saving would be found by changing to OO from INV, but if the break costs are prohibitive, there's no point. Ring again - the variable rate for an INV loan at CBA is way higher than what you've fixed so should be no cost. The second person you spoke to likely used OO rates rather than INV. Ring again and make no mention of changing to OO and I reckon you'll be able to break at no cost.

Bear in mind variable rates will be going up 4/10 so you may want to refix as OO.

 

Hi Jess, thanks for that. Maybe I'm a bit nuts, but I assumed that would be important and would have a range of potential implications. Obviously not! Appreciate the quick response

 

As long as you're not claiming interest on it, you're all good!

 

In that case on what legal basis are they saying you must break the loan?

 

If it's an INV loan and he wants to change it to OO, he'll need to break the INV fixed rate to change to an OO product. Makes sense.

 

I would love to see the bank financial advice that estimated the breakcost applicable to that change at the time you chose a fixed rate. I can accept that a OO loan needs to convert to INV but not the other way around. So they will impose a breakcost to put the rate to a lower OO rate ?? So you are paying a penalty for the rate reduction to OO. Dodgy.

I believe that is the owners choice not that of the lender.

Could be a matter to bring to FOS and argue that the bank is milking fees.

 

I can't see any legal basis for this. Doesn't matter what a loan is called

 

To change the name you have to change the product. They can't charge INV rates on an OO product.

 

It's an interesting one. I guess I will see if they will change it to OO variable for free as Jess suggests and then fix it after that. I wonder how long I need to wait between going OO variable to fixed. A few days, weeks? Does it matter?

 

You can do it straight away, no need to wait