How to Break Out of a Fixed Rate Home Loan in Australia
- 1). Find and carefully read your existing home loan documents before making a decision to break out of a fixed-rate home loan in Australia. You need to know what the break costs may be, as depending on your finances, it may not be a viable option.
- 2). Check the term of your fixed-rate home loan. Fixed-rates generally vary between six months and ten years. Deduct the period for which you have had the fixed-rate home loan and the resulting figure is the period left for your fixed rate.
- 3). Calculate the break cost. Your home loan documents must define break costs. You will have to pay a relatively small exit fee and an additional larger amount to cover the interest you would have paid to your lender if you maintained your fixed-rate home loan.
- 4). Contact your lender and ask them to confirm the amount of the break costs. If you want to proceed ask your lender what fees are involved in setting up a new home loan and what current interest rate charges apply. Get them to give you a provisional quotation for your revised monthly repayments.
- 5). Get your lender to mail you an application pack to apply for a new home loan and break out of your fixed rate. Read the documents carefully. Make certain you can afford the associated costs, even if you will be saving on your monthly repayments.
- 6). Complete the application forms and send them to your lender together, with any other supporting documentation and payment. Wait for your application to be processed and your home loan to be changed. You will receive new home loan documents to sign.
- 7). Read all the details carefully, ensuring that you understand them. If you are unsure, contact your lender. Better to do this before signing the documents and committing yourself. Sign the documents and return them to your lender to complete the process.
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