What is an Early Repayment Adjustment and when does it apply?

An Early Repayment Adjustment is a fee charged when you create a “break event” any time before the end of your fixed rate period on your loan.

A break event is defined as any of the following:

  1. Where you repay the loan in full.
  2. Where you have paid more than $10,000 over your minimum repayments during a 12-month period.
  3. Where you want to change the fixed term of your loan or move your loan to a variable rate.

We calculate the adjustment using a formula which includes:

  1. What the balance of your loan would have been over the remainder of the fixed period had you made your normal repayments, compared to what it will be after the break event;
  2. Published wholesale interest swap rates1 for relevant terms, when the fixed period started and when the break event occurs; and
  3. The loss would accrue over the fixed period, and a discount is applied to determine the present value of the loss.

Before you decide to exit your fixed rate term, it’s a good idea to request a break cost quote to determine if it’s worth paying break fees.

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