Early Repayment fee for fixed rate home loans

Your fixed rate home loan

With your fixed rate home loan, your interest is fixed from the start and stays the same for the term you've chosen. This option makes budgeting easier and gives you peace of mind, knowing your repayments will stay the same for the contracted term.

You're also able to make extra payments up to $10,000 per calendar year; however if you pay more than this or break a fixed term early, you may need to pay an Early Repayment fee.

Repaying or breaking your home loan early

If you decide to break your fixed rate home loan early to switch to a different interest rate, fully repay the loan early, or make over $10,000 in additional payments over the calendar year for example, an Early Repayment fee may be charged.

We calculate whether repaying or breaking your home loan earlier than agreed will result in a loss for us. If it does, we may charge an Early Repayment fee to help recover this loss.

How we calculate the fee

Rather than using the calculation in the Credit Contracts and Consumer Finance Regulations 2004, we use a different formula. This formula is comprehensive and complex, but it takes into account the following to see if an early repayment fee is to be charged, and if so, how much.

What’s considered

• The amount being repaid early.
• The time remaining in the fixed rate term.
• Our relevant current fixed interest rates¹.
• The loan to value ratio we currently record for your home loan.
• What your current regular payments are.

What we compare

• The interest that would've been payable on the relevant part of your loan for the time remaining in the fixed rate term (the first amount)² and,
• the interest that would be payable if we re-lent the amount you intend to repay early on the day of your repayment^{2 3} (the second amount).

If the first amount is larger than the second amount, that means we expect that your early repayment will cause a loss of income to us and an Early Repayment fee will be charged.

Repayment examples

Full repayment

Your home loan is on a two-year fixed special interest rate of 5% p.a. You choose to repay the entire loan balance, currently $100,000, in full, after one year and five months (leaving seven months of your fixed rate term remaining).

The total interest payable for the remaining seven months at 5% p.a. would be compared to the interest payable at our current special six-month interest rate to determine whether an Early Repayment fee should be charged and the amount of that fee. If our current special interest rate for a six-month term was 4.5% p.a., we will receive less income because of your decision to repay or break the loan.

You’d therefore be required to pay an Early Repayment fee being the difference between the two interest rates (0.5%) on $100,000, calculated for the remaining seven months of the existing fixed rate term, adjusted to recognise that we’ll receive the payment now, instead of over the term of the loan.

Partial repayment

Your home loan is $100,000 on a two-year fixed special interest rate of 5% p.a. You choose to repay $50,000 on that loan after one year and five months (leaving seven months remaining on your fixed rate term). Because you have not paid any additional payments in this calendar year, the $10,000 permitted additional payment applies and an Early Repayment fee is calculated based on the remaining repayment amount of $40,000.

Your current interest rate would be compared to our current special six month interest rate to determine the Early Repayment fee. If the current special interest rate for a six-month term is 4.5% p.a., then we’ll receive less income because of your decision to partly repay your loan early.

You would therefore be required to pay the difference between the interest rates (0.5%) on $40,000 ($50,000 less the $10,000) calculated for the remaining seven months of the fixed rate term, adjusted to recognise that we'll receive the payment now, instead of over the term of the loan.

To note:
The explanation and examples above are simplified and the actual Early Repayment fee calculation is very complex. The result of the calculation depends on the specific features and terms of your home loan — it won’t be the same for everyone and will change each day. We recommend contacting us for further info about the calculation and to ask us for a quote before you repay or restructure your fixed rate loan.

Don’t forget to read this bit

¹The interest rate we apply will be the closest current fixed rate available for the remaining time left on your fixed rate term.
²We adjust this amount to recognise that we’ll receive the payment now, instead of over the term of the home loan.
³When we calculate this amount, we'll use one of our current fixed interest rates. We select the Standard or Special fixed residential lending interest rate based on the loan to value ratio of your home loan we currently record.