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Should You Break Your Fixed Mortgage Early? A Cost-Benefit Analysis
Struggling with a high fixed mortgage rate while watching interest rates drop? You're not alone. This episode tackles the complex question many Kiwi homeowners face: should you break your fixed mortgage early?
Breaking a mortgage isn't just about chasing a lower rate—it's about understanding the true financial impact of that decision. I walk you through the common reasons people consider breaking their fixed terms, from significant interest rate drops to major life changes like selling property, separating, or relocating. But the critical factor is always the break fee calculation, which varies dramatically based on your specific circumstances.
These break fees (or earlierment costs) can range from manageable to eye-watering—I've seen some exceed $10,000. We explore exactly how banks calculate these figures based on your locked-in rate, remaining term, current market rates, and outstanding loan balance. The key takeaway? Always get a formal break cost calculation before making any decisions, as these quotes typically only apply for that specific day.
Through a real client case study, I demonstrate how breaking can sometimes be the financially smart move. With a 1.1% rate reduction and $3,000 cashback, my client came out $4,600 ahead despite paying a $4,200 break fee. But had the rate difference been just 0.2-0.3%, the math wouldn't have worked in their favor. I also cover alternatives to breaking, including partial repayments without fees, top-up loans, and split loan options that might provide relief without the hefty costs.
Whether you're feeling financial pressure or simply wondering if you could be getting a better deal, this episode provides the clarity you need to make an informed decision. Remember, breaking a mortgage isn't a yes-or-no question—it's a numbers question. Listen now, and don't make any mortgage decisions without understanding the full financial picture!
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By Zebunisso AlimovaStruggling with a high fixed mortgage rate while watching interest rates drop? You're not alone. This episode tackles the complex question many Kiwi homeowners face: should you break your fixed mortgage early?
Breaking a mortgage isn't just about chasing a lower rate—it's about understanding the true financial impact of that decision. I walk you through the common reasons people consider breaking their fixed terms, from significant interest rate drops to major life changes like selling property, separating, or relocating. But the critical factor is always the break fee calculation, which varies dramatically based on your specific circumstances.
These break fees (or earlierment costs) can range from manageable to eye-watering—I've seen some exceed $10,000. We explore exactly how banks calculate these figures based on your locked-in rate, remaining term, current market rates, and outstanding loan balance. The key takeaway? Always get a formal break cost calculation before making any decisions, as these quotes typically only apply for that specific day.
Through a real client case study, I demonstrate how breaking can sometimes be the financially smart move. With a 1.1% rate reduction and $3,000 cashback, my client came out $4,600 ahead despite paying a $4,200 break fee. But had the rate difference been just 0.2-0.3%, the math wouldn't have worked in their favor. I also cover alternatives to breaking, including partial repayments without fees, top-up loans, and split loan options that might provide relief without the hefty costs.
Whether you're feeling financial pressure or simply wondering if you could be getting a better deal, this episode provides the clarity you need to make an informed decision. Remember, breaking a mortgage isn't a yes-or-no question—it's a numbers question. Listen now, and don't make any mortgage decisions without understanding the full financial picture!
Send us a text
Support the show
Buy your first home in NZ Weekly Webinars
You thought it's not possible or the dream is too far away? Come to my webinar and I will show you, you are much closer to your dream, than you think you are!
Join Here - https://bit.ly/4m9SL72