Advice on Breaking Fixed Rate Mortgage

S

sexitoni

Registered User
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75
Hi,

I jumped into the property market in September to take advantage of the drop in prices, but I must admit I never saw the slashing of interest rates coming.

Anyway my mortgage was 285,000 in September and I fixed for three years at 5.2% with AIB. The repayment, before TRS is 1566 p/m before TRS and we have paid three months.

So my question is can anyone tell me if it's worth my while to take the breakage cost and 'administration fee' penalty to take advantage of the new rates, I got these from the AIB website from December but they're going to come down again:

Standard Variable 3.75%; 2 Year Fixed 3.55%; 3Year Fixed 3.90%; 4 Year Fixed 4.10%; 5 Year Fixed 4.20%; 10 Year Fixed 4.75%

I found this calculation on the AIB website but I must admit I don't get it:
Early breakage cost = A x U x D%, where
"A" is the amount of the prepayment or early repayment following demand by the Lender, or the amount of the conversion, and
"U" is the unexpired term of the fixed interest rate period, and
"D" is the difference between the fixed interest rate applying to the facility and the fixed interest rate which would then apply to the facility for the amount of "A" for the term of "U".
E.G. EUR100k @ 7% for 60 months, full repayment after 36 months, current prevailing rate for 24 months= 5% early breakage cost EUR4,000 (EUR100k X 24/12 X 2% = EUR4,000)
 
Last edited:
As per your example, Principle = 285K, U = 31months (5 months expired from Sept 08) and D = 1.3% (5.2% - 3.9%)
Early Breakage Cost in you case, 285K X (31/12) X 1.3% = €9571.25.....

I presume your mortgage term is for 30 years (based on 1566 repayments)

If you switch to Standard Variable rate @ 3.75%, your repayments would be 1320€ (approx) before TRS, where its a difference of 240€ per month on repayments. for 31 months the savings would be €7440 (approx). I guess you still lose 2 grand with the current rates. Just to give you an idea, and they are not accurate :)
 
brazen_dude said:
As per your example, Principle = 285K, U = 31months (5 months expired from Sept 08) and D = 1.3% (5.2% - 3.9%)
Early Breakage Cost in you case, 285K X (31/12) X 1.3% = €9571.25.....

I presume your mortgage term is for 30 years (based on 1566 repayments)

If you switch to Standard Variable rate @ 3.75%, your repayments would be 1320€ (approx) before TRS, where its a difference of 240€ per month on repayments. for 31 months the savings would be €7440 (approx). I guess you still lose 2 grand with the current rates. Just to give you an idea, and they are not accurate :)
Click to expand...

That's what I figured but I thought I was wrong because I was surprised at how the figure rises the more interest rates drop; even though I know right well banks makes sure they don't lose out.

Thanks very much for that - appreciate it.
 
bacchus said:
You are 3 months into a 30/35years mortgage, and you cannot wait 1 or 2 days. LOL
Click to expand...

I asked for help with the calculation because this seemed like the kind of place one might ask such a question, and someone was good enough to give me that help.

I was also looking for an educated guess about future interest rate movements, which might still make it worth my while, information I probably wouldn't get from the bank.

I didn't really fancy being bounced around some automated call system for half an hour and I figured I'd get the information more quickly here. And I have, so bite me.

I assume that if I could be bothered to check I'd find more than one of your 1600+ internet message board posts where an obvious reply would be 'make a phonecall and ask'. But if I was bothered I'm pretty sure I still wouldn't go out of my way to be such an ass.
 
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