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Breaking your fixed rate home loan.

Breaking your fixed rate could save you money over time but you will be charged a prepayment cost (sometimes known as a break cost). Consider whether the potential interest savings are greater than the upfront cost.

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Are there any costs?

If you've come into some money and want to pay off a large portion of your fixed rate loan, or you want to get a lower interest rate, you will need to pay a prepayment cost (sometimes known as a break cost).

This cost is the difference between the wholesale interest rate when Westpac first borrowed from the market (all banks borrow from the wholesale market to fund home loans) compared to the wholesale interest rate on the date which you are prepaying the fixed loan.

To find out more on how this is calculated please refer to this prepayment guide. You will also be charged an administration fee for processing a prepayment on your fixed rate loan.

Reasons to break your fixed rate home loan.

Breaking to get a lower interest rate

Breaking your fixed loan to get a lower interest rate means you can reduce your repayments. While this may sound attractive, it's important to check that the money you're saving with a lower interest rate outweighs the prepayment cost for your loan. You can do the calculation yourself or we can help walk you through your options.

Breaking to change your term

If your circumstances change, it's possible to break your fixed loan to change your term. By extending your term, you're paying off your loan over a longer period. While this means you can reduce your minimum repayment amount, you'll also end up paying more in interest overall so it's worth considering how much you'll end up paying in the long term.

Breaking when you're selling

If you're selling your home and buying a new one, you may be able to transfer your Westpac home loan to your new place, without incurring any prepayment costs. Do call us to discuss your options. If you're planning to repay your loan once you've sold your home, you may decide to break your fixed rate home loan before settlement, put the loan on a floating interest rate and pay the prepayment costs you've been quoted. This will lower the risk of paying higher prepayment costs if interest rates have fallen between the time you got the quote and reach settlement.

Breaking if you've come into money

If you've come into some money, such as an inheritance or bonus, you may choose to break your loan at this point. Using this lump sum to reduce your home loan potentially means the interest saved over the course of your loan could outweigh the prepayment cost.