A fixed loan break-cost calculator could help you work out what kind of fee you'll be charged when you break a fixed rate loan contract early, usually due to selling a property or refinancing.
Unfortunately, this calculator can't exist. This is because a fixed rate break cost is always personalised and based on the specific details of your loan. These details could include the following:
While we can't give you an exact break-fee estimate, we can help you understand how banks calculate your break fee to give you an indication of what you may pay.
Lenders charge you fees to compensate for any financial losses they incur as a result of breaking your fixed rate home loan early.
If you decide to break that contract by switching loans or lenders (or selling the property) before the fixed period has ended, your existing lender will want to be compensated for the financial loss they incur. You have promised to repay them interest for 3 years, and now you are ending the loan early. They can re-lend that money to someone else, but they may not make as much money if their fixed interest rate is now lower.
This is why you pay a fee – to compensate them for the lost interest you committed to pay in your loan contract.
| Response | 75+ yrs | 65-74 yrs | 55-64 yrs | 45-54 yrs | 35-44 yrs | 25-34 yrs | 18-24 yrs |
|---|---|---|---|---|---|---|---|
| 3 yrs | 6.98% | 3.73% | 2.92% | 4.35% | 9.84% | 9.71% | |
| 2 yrs | 2.33% | 1.86% | 2.92% | 6.28% | 7.87% | 7.28% | 5.71% |
| 4 yrs | 2.33% | 1.86% | 1.75% | 2.9% | 3.54% | 1.94% | 2.86% |
| More than 5 yrs | 2.33% | 1.86% | 1.17% | 1.57% | 2.86% | ||
| 1 year | 1.24% | 2.34% | 3.38% | 4.33% | 1.46% | 2.86% | |
| 5 yrs | 2.92% | 3.38% | 3.54% | 2.91% | 2.86% |
There are a few fees to pay when you break a fixed home loan.
There is often a penalty fee, which is set by each bank or lender, and usually costs $1-200. Not all banks charge this fee.
Next, there is an interest adjustment to cover the interest losses to the lender, as explained in our examples. This can be the most expensive part, often running to thousands (or even $10k+), depending on the interest rates at the time.
There may be a fee to cover the economic costs to the lender, which they charge to reimburse them for the cost/time to the lender of ending your contract early. Again, these are usually in the range of $1-200.
And lastly, there are lender fees and charges, which are set by each lender individually, and may be waived if you are ending the fixed rate loan, but staying with the same bank on a variable rate loan.
There are some complicated formulas and calculations involved in calculating this rate – in fact, it's so complex, the amount actually changes daily.
Breaking a home loan during a fixed interest period can be expensive, which is why you should ask your lender how much it will cost you to break your fixed interest rate home loan before you decide to do it.
If you're considering getting a fixed rate home loan but you're concerned about flexibility, you might want to consider a variable mortgage instead.
See how much you can save with a lower rate
As for how they calculate your fixed rate, it gets a little complicated, but bear with us. Lenders will typically finance your home loan on the wholesale market with a fixed maturity date. At the time you switch loans or repay your loan early, the bank will use the Bank Bill Swap Rate (BBSR), or BBSW, to calculate your early repayment cost or break fee. Current BBSRs are displayed on the homepage of the Australian Financial Markets Association and the ASX website.
The BBSR is the interest rate charged on wholesale fixed rate borrowings for banks. It is a floating market, so rates change daily, if not by the minute. They use this because it is the most transparent indicator of the cost of funding for your loan.
If you wish to break your fixed rate loan, the lender will compare the BBSR when you originally entered the loan with the BBSR at the time you break the loan.
As BBSRs use specific time periods, such as a 3-year maturity BBSR, an early repayment cost will be calculated against a BBSR of the same time period that you have left on your loan. So if you have 1 year left on your 3-year fixed home loan, your original BBSR will be calculated against the 1-year BBSR on the day you break.
Like we said, it's complicated, and because of all of these different factors, the break fee you will be liable to pay changes daily.
Let's say you decide to break a 3-year fixed loan at the start of the third year, when you have 1 year remaining.
Your lender will compare the original market swap rate with 1-year market swaps (as that is the period remaining on the loan).
If the current BBSR is less than it was at the time of fixing, the customer will have to pay the difference on the amount that was agreed to be paid for the remaining term – as your lender has an obligation to keep up their repayments on their wholesale funding for your loan. They have an agreement to pay their wholesale lenders a fixed amount, whether those lenders are on the market or an internal lending arm. These charges compensate for the estimated cost in lost interest and administration time.
If the current BBSR is more than it was at your original time of fixing, then you won't have to pay any interest penalties. Other fees and charges may still apply.
| Loan amount | $500,000 |
| Loan length | 30 years |
| Fixed period | 3 years |
| Repayment type | Interest-only |
| Repaid when? | March 2024 (2 years into a 3-year fixed period) |
| Interest rate of loan | 2.8% p.a. |
| 1 year of repayments remaining | $14,000 |
| 3-year BBSR (April 2022) | 2.98% p.a. |
| 1-year BBSR (March 2024) | 2% p.a. |
| Difference between original 3-year BBSR and 1-year BBSR at break | 0.98% p.a. |
| Difference/original BBSR (0.98%/2.98%*100) | 32.89% |
| 1 year of repayments remaining | $14,000 |
| Early repayment adjustment (32.89% x $14,000) | $4,604 |
| Plus exit fees and penalties | $500 |
| Total early repayment adjustment + fees | $5,104 |
Loan details
In the above example, a borrower has broken a 3-year, interest-only home loan at the start of the final year and during this time period, fixed rates and the BBSR decreased.
As the borrower, you have to pay the difference in the interest rate that was agreed to be paid in the final year, so the lender doesn't incur a financial loss.
Note that this example uses hypothetical calculations that don't reflect the actual BBSR for these time periods.
| Loan amount | $500,000 |
| Loan length | 30 years |
| Fixed period | 3 years |
| Repayment type | Interest-only |
| Repaid when? | March 2024 (2 years into a 3-year fixed period) |
| Interest rate of loan | 2.80% p.a. |
| 1 year of repayments remaining | $14,000 |
| 3-year BBSR (April 2022) | 2.98% p.a. |
| 1 year BBSR (March 2024) | 4.20% p.a. |
| 1 year of interest remaining | $14,000 |
| Early adjustment | -$5,732 |
| Estimated exit fees | $500 |
| Total early repayment adjustment | $500 |
Loan details
In the above example, a borrower has broken a 3-year, interest-only home loan at the start of the final year; however, during that time period, fixed rates have increased.
The lender now stands to earn more money by re-lending that money to someone else.
Therefore, as the borrower, you don't have to pay hefty interest penalties.
Note that this example uses hypothetical calculations that don't reflect the actual BBSR for these time periods.
With a fixed rate home loan, your rate doesn't change during the fixed period. After the fixed period ends, the loan reverts to a variable rate loan. With a variable interest rate, your lender can change your interest rate at any time.
Most Australian lenders let borrowers fix their rate for a period between 1 and 5 years.
If you want to fix your rate for a longer period, check out our guides on:
If you are thinking about breaking a fixed home loan, your first step is to contact your lender and request a quote for breaking your loan inclusive of the early repayment cost. Then, compare the interest costs of a potential new loan.
You should also weigh the pros and cons of fixed and variable rates when making your decision to switch.
While getting a 10-year fixed rate home loan might be a good idea if you want to keep your repayments the same over the next decade, you will pay more if interest rates drop.
Save on interest rates and enjoy tax savings with fixed rate interest in advance home loans.
Thirty year fixed rate home loans are a great way to lock in a great interest rate for the entirety of your loan but Australia doesn’t currently offer this lengthy loan option.
If you are looking to invest or you want to reduce your repayments, you may want to compare fixed rate interest-only home loans.
The secret to minimising interest on a fixed rate home loan.
Hi. I have a Five year Interest Only Loan with The Commonwealth Bank which began on February 20 2012 at a rate of 6-69% and for the amount of $114000. My latest statement shows the rate on my loan is now 5-23%-if its supposed to be fixed why has it gone down?Not that i am complaining about the lower repayments I am just curious? if i want to break this loan how much would I have to pay under the Early Repayment Adjustment fee? I want to sell my home hence the want to break the loan. Thank you.
Hi Richard,
thanks for the question.
I’d recommend calling The Commonwealth Bank to find out why your rate has changed. In addition, they should be able to help give you an accurate quote on how much the early repayment fees might cost.
I hope this helps,
Marc.
I have a home loan of 313k @7.44% fixed till May 2022. I do not live in it and want to sell the property.
Hi Melissa,
Thanks for your comment.
Unfortunately, you may be liable to pay break costs and discharge fees if you exit your loan during the fixed period. It’s a good idea to speak to your lender first and try come to an agreement.
You will need to compare whether these break costs are worth the benefits you get from selling the property.
Hope this helps,
Shirley
Hi, i have a home loan of $269,000 on a 5.29% interest rate. Interest only for 3 years. I took this loan out on 15/06/13. How much would my early repayment fee be if i paid it out in dec of this year? Thanks!
Hi Maria,
Thanks for your comment.
It’s a bit hard to say without knowing the full details of your home loan. The process of calculating your early repayment fees is very complex, it’s probably best to contact your lender to enquire about this.
Hope this helps,
Shirley
Hi Shirley
Thanks for your advise. I will contact my bank then.
Cheers!
Maria