Mortgage penalty for breaking a fixed rate

B

Bronte

Registered User
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If you ask a bank to break your fixed rate they are (generally) entitled to charge you a penalty. Normally they send you the breakage fee in writing but it doesn't show how the calculation is made. Is it possible to ask the bank for this and do they have to supply it?
 
It should (but i know not all give a detail explanation) say on your mortgage agreement. What bank is it, someone will probably be able to tell you how that particular bank calculates breakage fees.

They would have to tell you how the figure is arrived at, they couldn't just pluck a figure out of the thin air with no explanation, but really it'll probably be just an explanation of how they are going to screw you.
 
When I asked the bank this on my rental mortgage they told me 6 months interest would be the payment.
 
Maybe I should ask this differently. A lot of people on AAM have questions in relation to their penalties but I notice most of them just accept the bank's phone quotation of the penalty but they do not bother to check a) is it's actually based on the penalty clause in the contract and b) check that the bank has calculated it correctly. The banks have made so many changes to penalty clauses over the years that it's entierely possible that they are systematically applying say the current penalties which might bear no relation to one's original contract.
 
Senna said:
but really it'll probably be just an explanation of how they are going to screw you.
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I really don't understand this view,
You made a bet with the bank that you hoped would mean you pay less than they wanted, you lost and now don't want to pay up on, you are asking them to let you out of that arrangement and get upset when they say they WILL let you out for only 6 months payments.

I really do think people don't understand what they are asking of the banks.
 
hi got a quote from first active today to break out of fixed rate i fixed it until oct 2010 at 5.75% they quoted me nearly 54K are they having a laugh could this be right on a mortgage of 138K thanks for any advice
 
would be great if it was a typo at their end the exact amt is E53,853
 
TwoWheels said:
I really don't understand this view, ...........when they say they WILL let you out for only 6 months payments.

I really do think people don't understand what they are asking of the banks.
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I think banks that calculate breakage fees by looking at what current fixed rates are, compared to what fixed rate your on, those banks are working out what it costs them and so that is the fee you pay. The banks that ask for 6 month of repayments regardless of duration, rate or mortgage amount are screwing the customer. If i have 3 months left on a fixed rate an ask to break, paying the same as if i had 9 years and 3 months left is really ridiculous.
I've no problem with a bank asking for what it cost them to allow you to break, even if it works out a lot more than 6 months repayments, but just picking a arbitrary rate is unacceptable.
I agree completely with your betting comments, it is a bet and you should have to pay for making a bad decision.
 
the amt should have been 3,853E would this be right if my breakout agreement was to pay 6mths interest thanks j
 
That sounds more like it. thats approx 6 mths interest - penalty is usually lower of 'cost to bank' or 6 mths interest. The longer left on the fixed term the more likely it will be the 6 mths figure if only few months left cost to bank may be less.
 
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