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Breaking Fixed Home Loan Calculator

Reviewed by Calculator Editorial Team

A breaking fixed home loan occurs when a borrower pays off their fixed-rate mortgage before the fixed period ends, switching to a new interest rate. This can save money if interest rates are lower than the fixed rate, but it may incur fees and penalties.

What is a breaking fixed loan?

A breaking fixed loan is a mortgage where the borrower can pay off the loan before the fixed period ends, switching to a new interest rate. This is different from a fixed-rate mortgage where the interest rate remains constant for the entire term.

Breaking a fixed loan typically involves paying off the loan balance early, which can save money if interest rates have fallen. However, it may incur fees and penalties depending on the lender's terms.

How breaking a fixed loan works

When you break a fixed loan, you pay off the remaining balance before the fixed period ends. The lender then calculates the interest for the remaining period based on the new variable rate.

The process usually involves:

  1. Contacting your lender to request a break
  2. Paying off the remaining balance
  3. Switching to a new interest rate
  4. Potentially paying fees or penalties

Breaking a fixed loan can be beneficial if interest rates have fallen significantly, but it may not be worth it if rates are only slightly lower.

Costs of breaking a fixed loan

Breaking a fixed loan may incur several costs:

  • Early repayment fees
  • Redraw facility fees
  • Interest on the remaining balance
  • Lender's mortgage insurance (LMI) if applicable

The exact costs depend on your lender's terms and the remaining balance of your loan.

Strategies for breaking a fixed loan

Before breaking a fixed loan, consider these strategies:

  1. Check current interest rates
  2. Calculate potential savings
  3. Compare fees and penalties
  4. Consider the remaining loan term
  5. Assess your financial situation

Use our breaking fixed loan calculator to estimate the costs and benefits of breaking your fixed loan.

FAQ

Can I break my fixed loan at any time?
No, you typically need to follow your lender's terms and may incur fees or penalties.
Will breaking my fixed loan save me money?
It depends on current interest rates and your lender's fees. Use our calculator to estimate potential savings.
What fees might I pay for breaking my fixed loan?
Common fees include early repayment fees, redraw facility fees, and LMI if applicable.