Westpac break costs

I have a 7.5 months to go on a three year fixed loan with Westpac. The difference between the fixed and the variable isn’t much, I think 0.06. I was a bit surprised today when they told me it would be $4700 + $300 in admin fees. Loan is $565k.

I’m wanting to break because if I go from IO to P&I I can borrow more for my PPOR purchase.

I’ll call them back on another day and see what they say then because it changes daily I know, but my question is, is there a certain point where it’ll get drastically better? Like breaking a mobile phone contract? Say if there’s less than 6 months to go? Or less than 3?

 

Break fees are based on some sort of calculation, time remaining being one of the variables. However there's not specific points in time where the calculation changes, just the value of the variables in the calculation.

 

The longer you wait the cheaper it will likely be (assuming funding cost differentials remain the same between then and now). That is a pretty hefty fee though.

What id suggest:
- explore an alternative way to get what you need for your PPOR. Some lenders offer more for having existing debts at IO than P&I. This may be used as a temporary solution.
- revisit this loan change a bit later, ideally once the expiry period is over.

 

Any suggestions for lenders? Mac Bank, CommBank, ANZ and Westpac would all loan us enough if we were P&I, the only two who will allow us enough otherwise (that the broker has looked into) are Liberty and Firstmac.

We can revisit again down the track but we want another child so we want to buy our PPOR before the next dependant comes along and shatters our borrowing capacity. Also I’m hoping when spring rolls around there will be more options, hardly anything on the market at the moment.

 

If the loan is investment use the break costs might be deductible in full, which lessens the pain

 

Yeah I’m bearing that in mind, $5k is a bit more than I’m willing to pay at this point though. Will give them a call again in a week or two and see how it compares.

 

@Hetty - perhaps try Resimac too.

Their rates will beat all of them, and they’ll likely lend you the money too based on the info provided above.

May not actually need to refi back out given the lower cost. Have a discussion with your broker to consider the overall view/costs/benefits over the time horizon - there’s a bit more funding risk, but plenty of borrowers choose low rate non bank lenders for cost purposes.

 

@Redom okay I’ll ask. Thank you. I’d rather a bank but will see what they can do. They’re secretive about their rates on their website!

 

If so I won’t break it and will find another way. I’ll have to weigh up and work out the best course of action. I was lucky last time, broke a fixed with TMBank and it was a few hundred dollars. They’re much more reasonable than Westpac!

 

These are the perils of fixing!

 

Yep, I know. At the time we didn’t have plans to buy a new PPOR (the fall in Sydney prices has made it achievable) and silly me locked in for three years, which in hindsight was a big mistake. We just came off fixed after two years on another IP loan which wasn’t an issue, no regrets at all there.

 

I personally haven't fixed a loan for about 20 years because of a painful similar experience.

 

This is my third time fixing and only time I haven’t gotten away with it lol

@Redom (or anyone else, just because Redom mentioned it), is Resimac better than Firstmac in terms of rate creep? And I know some Resimac products are Pepper, which Resimac products should I ask my broker to look into?

 

Thanks Rolf, that’s very useful. We have a fair chunk of investment debt so that’s probably why he’s gone Firstmac.

 

If I refinance and get the break costs added to the loan is it tax deductible still?

 

That won't changed deductibility of the break costs

 

Brilliant. Looks like this might be a go, will really only cost $3k (with the savings in interest) and then tax deducting will lessen the pain.

 

Don't forget you might also be getting a lower interest rate going forward.