Hi guys, has anyone heard of a loophole that avoids paying break fees on fixed term loans?
After querying my bank today on the cost to pay out our fixed term house loan, my wife was told by the loan officer of a way to avoid the $37K we would be up for if we sold our home and paid out the loan and. Now she wasnt too sure on what it was (info overload I think!) so I'll will be contacting them again on Monday. May have to with purchasing another home directly…same size mortage maybe??
Any ideas?
Neil
I have heard of some lenders that allow you to transfer the security on the loan from one property to another property.
So this allows you to buy another property and sell your old property without breaking the loan. .woodynads.
let us no what you find out with breaking the loan and not having to pay exit feeI think the best you could argue if you were facing a big fee is to break down the remaining term, and compare your current rate to the predicted rates over that period.
ie If you break a loan today, and you are on 8%, and todays rate is 6%, this forms the basis for the penalty. The result is then multiplied for the remaining term is 2.5 years.
If you took this one step further and looked at that particular institutions rates for fixed loans over that period, you might find that todays rate is 6%, but the 1 yr fixed is at 6.3%, and the 2 yr fixed is 6.5% and the three yr fixed is 6.9%.
You could argue that the bank should break down the remaining term to more accurately reflect their loast revenue, and maybe this will be a lower figure.Honestly, I have seen some institutions use very basic methods for working out the break fees, and I have seen some two page scientific formula's used also.
It will be most practical to ask your bank for a copy of the formula (if you cant see the breakdown of the formula in your loan agreement), and find a way to manipulate it to your advantage.
Best of luck.
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