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installment

My installments are half fixed 3 yr and half variable.Shud i pay the exiting fee and switch over to variable on the whole lot? will i save money?

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Permalink Reply by Bytta on December 4, 2008 at 11:02am

hi Jane,

i'm in the same situation as well. what you can do is to enter the figures on Loans Comparison calculator which is available on www.infochoice.com.au
i asked my lender about the exiting fee and it's ridiculous.
basically the formula they use is: the balance of your loan x the difference between your fixed rate and money market rate x the proportion of time left in your fixed period.
for example, if you have 100k loan balance, 2 years left and 8.50% fixed rate, it'll be:
100K x 2 x (8.50% - 5% (estimated mm rate,it's a close figure)) = $7000.
in my case, it's not worth breaking the fixed term and switch over since i'll end up losing money.

i think you need to ask you lender for a more accurate information. who knows they might have a different calculation.

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Permalink Reply by jane on December 4, 2008 at 12:46pm

yes!! i think its bizarre..I was with private lender before and the exitting fee for $266000 loan was 3500 and came to comm bank and with this bank i got 120000 fixed , may be it should be lower...i am thinking of selling my house and never to go for loan ever in my life untill i have whole money....I hate it...

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Permalink Reply by Bytta on December 4, 2008 at 1:21pm

at the moment, the only way to get out of fixed rate contract and not losing money is to find a loan that offers an interest rate lower than the money market rate (which is impossible) or make enough noise and fuss so the government will take serious action against excessive fee.

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Permalink Reply by jane on December 4, 2008 at 1:50pm

hmmm!!! This is making me insane.
Iam paying like $40 xtra a month and their is another rate cut again

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Permalink Reply by Bytta on December 5, 2008 at 1:42pm

aha, the way i see it is this is the risk i have accepted when i decided to split my loan. i enjoyed lower payment during the rate hike and now i take the loss from the extra money i pay since the rate cuts.
that's ok.
the reason i fixed half of my loan was based on a sound judgment and strategy and i would do it again.there is NO way i could have known then that the interest rate would go this low.
Not even the Mr. Stevens from RBA had expected this.

don't beat yourself over $40/month. so not worth it. and you can still offset it by saving money on other areas of your life.

you still enjoy the lower rate from the other half anyway. imagine the people who fixed the whole lot.