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Break Costs
If you want to cancel your home loan contract before the loan term expires, you will usually incur break costs. It is up to each lender to determine what their break costs will be and are also calculated differently.
The calculations for break costs vary according to how many years you have left the loan term, how much money you borrowed, what interest rate you are paying and it can also be determined by the current Money Market rate, which is the rate that the banks use to determine the interest charged on money borrowed between lenders.
Break costs are higher for fixed loans if you are still in the fixed period because the lender is essentially going to lose its profit from you because you are paying a higher rate to fix. That is why the lender will calculate how much they will lose by you ending the loan contract and charge you break costs accordingly.
The table below today's best variable interest rates.
