Break costs - frequently asked questions

A break cost is a fee that could be charged if you end a fixed loan prior to the fixed interest rate period  – either by refinancing elsewhere, switching your product, or paying the loan off early.

When a fixed rate loan is taken, we’re giving you the benefit of certainty around your rate and what your repayments will be during the fixed rate period. The rate provided is based on numerous factors at the time the loan was taken out.

However, if you repay some or all of your fixed rate loan early, this impacts on our funding of this loan and the associated costs (if any) need to be determined. This can result in us charging you a break cost fee to help recover the costs incurred by the fixed rate loan finishing before it ends.

A break cost fee may apply if, before the expiry of your fixed rate period you:

• repay your loan in full by either selling, refinancing or for any other reason; or
• exceed the allowable extra repayment threshold; or
• request to switch to another product, interest rate or payment type, or change the fixed period, term of the loan or loan amount.

The ‘extra repayment threshold’ is where you either make additional repayments totalling up to $10,000, or make a lump sum payment of $10,000 in any one year (with the first one-year period starting on the first day of the fixed rate period). Break costs may apply for amount above the $10,000 limit. Redrawing the additional repayments is not permitted.

For greater flexibility with paying off your loan quicker, consider a package product, where you can split your loan with a variable rate product. This allows you to make unlimited extra repayments on the variable portion without incurring any break costs, while still having the security of having a fixed interest rate on a portion of your loan.

A break cost is different for each individual member, and is based on a calculation that considers a range of factors such as:

• The wholesale interest rate that applied on the first day of the fixed rate period for that fixed rate term;
• The current wholesale interest rate that applies for the remaining part of the fixed rate period (at the time of breaking the fixed rate loan);
• The amount of extra repayments (including lump sum) or the amount of your outstanding balance at the time of changing your loan conditions;
• Timing dollar amount and frequency of set repayments per your loan contract; and
• The remaining fixed interest rate period.

Please contact us to request an estimate of the break costs that may be applicable to your fixed rate loan.

The break cost quote we give you is valid for five business days only.

The final amount payable will be determined on the day that the break event occurs. If the loan is paid out within five business days of the last quote having been given, we will charge the break cost fee as described in the quote, unless there has been a variation in the wholesale interest rate or any other variant between the date of the quote and the date on which the loan is paid out, which would result in:

i. the break cost fee being less, we will charge the lesser amount; or
ii. the break cost fee is more, we will not charge the difference.

Break costs may be high – sometimes in the thousands of dollars. Talk to us for a quote of the break costs and consider seeking independent financial advice.