Avant Mortgage fixed rate break fee

[AL2016]

Hi,
My mortgage is currently with KBC with about 200K outstanding. The 5 year fixed period has just ended and i am looking into my options, we are about to roll on to a 3% variable. House value is approx 450k.

Avant money looks to be the most attractive option for now and i'm considering the 5 year fixed at 1.95%.
The one thing im trying to confirm is the 2% early redemption fee listed.

Does it mean that once we switch to Avant Money, should we wish to switch again at some point in the future after the fixed period this 2% charge will apply? In my case that would be about 4k

 

[Brendan Burgess]

should we wish to switch again at some point in the future after the fixed period

No, after the 5 years, you can switch again without penalty when the fixed rate is up.

The early redemption fee applies only if you switch during the 5 years.

With any lender, if you terminate a fixed rate early, you may be charged a break fee for early redemption.

Avant Money puts a ceiling on it of 2%.

So if the balance on your mortgage is €200k, the maximum break fee will be 2%.

In most cases, it will actually be a lot less.

 

[Brendan Burgess]

The break fee also applies when you pay a lump sum of your fixed rate mortgage.

let's say you inherit €100k and want to reduce your mortgage by that amount, Avant will calculate a break fee, which could be anywhere between zero and €2k.

Brendan

 

[Paul F]

@AL2016 The Avant 1.95% rate does indeed look like the best choice for you. You can fix at that rate for up to 7 years.

And if you start the switch to Avant before the end of March and use a broker who is an Avant "Gold Partner", you are eligible for €1,500 cashback.

If you're prepared to settle for smaller savings in exchange for a longer fixed rate, consider Avant's 2.1% rate, fixed for 10 years.

 

[Gordon Gekko]

The break fee also applies when you pay a lump sum of your fixed rate mortgage.

let's say you inherit €100k and want to reduce your mortgage by that amount, Avant will calculate a break fee, which could be anywhere between zero and €2k.

Brendan

You’d probably avail of the 10% overpayment feature in that case, no?

And just spread it out over a couple of years if needs be?

 

[Tickle]

And just spread it out over a couple of years if needs be?

Actually, it wouldn't make sense to do that. A lot more interest would be paid over the following years by taking that approach. The 2% breake fee limit is very close to 1 years interest if you are on the lowest rate, so it's actually quite favourable even if you have to take the 2% hit.

Taking the example of outstanding mortgage of 200k, interest rate 1.95% fixed for a few more years and 100k overpayment:

Option 1: Pay off 100k, and max break fee will be capped at 2% or 2,000 euro. Remaining balance is 100k.

Option 2: Pay off 10% of balance, 20,000 and there is no break fee. Remaining balance is 180k.


With Option 2 at 1.95% interest rate, approximately 1,568 will be paid in extra interest over the next 12 months. And the following year after another 10% off the balance, another 1,300 or so will be paid in extra interest - the exact amount depends on the balance and capital repayments each year. And so on, additional interest is being paid until the balance reaches 100k. And by that time, in comparison with Option 1, the outstanding balance will also be greater.

 

[Brendan Burgess]

Hi Tickle

Good point, but the main point is to maximise your 10% free overpayment.

For example, if you were in December, don't break out and pay 2%.

Pay the 10% in December.
Then pay another 10% in January. ( Assuming it's on a calendar year basis?)