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| Paying off your fixed rate home loan early, or breaking the fixed term of your fixed rate home loan in order to get a lower rate, can mean that a break cost will be charged. |
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| The following information should help you understand more about break costs. It may also help you decide whether breaking your fixed rate home loan is the right option for you. |
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Westpac mortgage info
Contact us
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Contact us now |
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email |
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Westpac branches |
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phone 0800 177 277
(Monday to Friday,
8am to 8.30pm;
Saturday
9am to 3pm) |
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| When we lend you money for a fixed term, you enter a contract with us (your Choices Home Loan Agreement) to make regular repayments on your home loan for a fixed period of time and at an agreed interest rate. |
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| If you switch to another interest rate, or repay some of that loan before the fixed term has ended, you are breaking that contract and we may have to rearrange funding positions that we have in place in the wholesale interest rate market. |
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| As stated in your home loan agreement, any cost that arises because of this is passed on to you. This is called the ‘break cost’, or it’s also sometimes called the ‘prepayment cost’. |
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> more information about how the break cost is calculated, including the formula used
If you want to know the exact costs associated with breaking your fixed rate home loan we can provide you with a quote. A quote is valid for three days. |
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| > come and talk to us at your nearest branch |
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> phone 0800 177 277
(8am to 8:30pm, Monday to Friday; 9am to 3pm, Saturday) |
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| Generally speaking, any short-term gain from interest savings may be offset or even outweighed by the break cost. For this reason, you should carefully consider whether it is appropriate to break your fixed rate home loan. |
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| However, if a reduction in your regular home loan repayments would make a difference right now, then we can talk you through your options, including alternatives to breaking your fixed rate home loan. |
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| > come and talk to us at your nearest branch |
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> phone 0800 177 277
(8am to 8:30pm, Monday to Friday; 9am to 3pm, Saturday) |
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| It may be possible to add the break cost to your loan. In this case you may benefit from the reduction in your regular repayment amount, but the total repayments you make over the life of your loan may be higher. |
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| We can talk you through this and help you understand the financial impact of breaking your fixed rate home loan and adding the break cost to your loan. |
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| > come and talk to us at your nearest branch |
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> phone 0800 177 277
(8am to 8:30pm, Monday to Friday; 9am to 3pm, Saturday) |
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| We do have options available to help you if you’re going through a difficult period. It’s important that you talk to us about your situation as soon as you can. |
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| > come and talk to us at your nearest branch |
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> phone 0800 177 277
(8am to 8:30pm, Monday to Friday; 9am to 3pm, Saturday) |
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| If you’re selling your home and buying a new one you may simply be able to transfer the loan without incurring any break costs. |
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| However, if you are going to be repaying your loan on settlement, you may want to remove the risk of break costs increasing after your break cost quote expires if interest rates fall further. |
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> more information about repaying your loan on settlement
You can do this by breaking your fixed rate home loan before settlement and putting the loan on a floating interest rate.
Please note that a break cost quote is valid for three days. |
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| > come and talk to us at your nearest branch |
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> phone 0800 177 277
(8am to 8:30pm, Monday to Friday; 9am to 3pm, Saturday) |
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Scenario 1—Paying off their loan
John and Mary decide to pay off their loan in full because they sell their home, and do not repurchase. The break cost will need to be paid immediately. |
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Scenario 2—Switching to a lower interest rate
John and Mary decide to break their fixed rate home loan because they want to go to a new lower rate of 18 months at 5.85%. The break cost will need to be paid immediately. |
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| Their monthly regular loan repayment will reduce by $420 per month and they will save approx $9,300 in interest over the next 18 months. |
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| If they choose to keep their loan payments at the original level, they will pay off the loan around 3.5 years faster than planned. |
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Scenario 3—Switching to a lower interest rate and adding the break cost to the loan.
John and Mary decide to break their fixed rate home loan because they want to go to a new lower rate of 18 months at 5.85%. However they can't afford to pay the break cost upfront, so they decide to increase their loan to cover the cost. |
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| Their monthly loan repayment will reduce by $330 and they will save approx $8,000 in interest over the next 18 months. However, including the break cost, they’ll pay approx $20,800 more in total repayments over the life of the loan. |
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| The above scenarios are illustrations only based on approximate figures and prevailing market conditions for this particular scenario as at 05/02/2009. The break cost is based on a remaining home loan balance of $198,000. Every loan transaction differs, so please feel free to contact us to review your specific loan transaction. |
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