What are Fixed Loan Break Costs

When you fix a loan there are potential break costs if you wish to leave the loan early however it’s impossible to ascertain these upfront as:

  • each bank has a different (complex!) formula for calculating the break costs
  • they can change each day
  • they’re related to what the fixed rates are at the time you want to break the loan
  • ie if the fixed rates are higher you should have nil or lower break costs, if the fixed rates are lower that’s where costs can be higher to break
  • they’re also related to how much time is left on the loan