An Early Repayment fee may be charged if you have a fixed interest rate for an agreed period and during that period:
- You repay your home loan, either partly or in full.
- You ask us to give you a different type of loan or a different type of interest rate, including another fixed rate.
- You ask us to change your loan term, or the type, frequency, or amount of your required payments.
- You breach your home loan contract and we ask you to repay all of your home loan early.
The purpose of the Early Repayment fee is to recover an estimate of our likely loss (if any) when a loan is partly or fully repaid earlier than agreed.
We do not use the calculation procedure set out in the Credit Contracts and Consumer Finance Regulations 2004.
We use a different mathematical formula. The formula takes into account:
- The amount being repaid early.
- The time remaining in the fixed rate term.
- Our relevant current fixed interest rates.
- The loan to value ratio we currently record for your home loan.
- What your current regular payments are.
We then calculate the Early Repayment fee by comparing:
- the interest that would have been payable on the relevant part of your loan for the time remaining in the fixed rate term (the first amount) and,
- the interest that would be payable if we re-lent the amount you intend to repay early on the day of your repayment (the second amount).
We adjust both of these amounts to recognise that we will receive the payment now, instead of over the term of the home loan.
If the first amount is larger than the second amount, that means we expect that your early repayment will cause a loss of income to us and an Early Repayment fee will be charged.
When we calculate the second amount, we will use one of our current fixed interest rates. We select the Standard or Special fixed residential lending interest rate based on the loan to value ratio of your home loan we currently record.
The interest rate we apply will be the closest current fixed rate available for the remaining time left on your fixed rate term.
An Early Repayment fee is not charged on partial repayments if you do not exceed the additional repayment allowance of $10,000 per calendar year above your regular payments.
Full repayment example: Your home loan is on a two-year fixed special interest rate of 5% p.a. You choose to repay the entire loan balance, currently $100,000, in full, after one year and five months (leaving seven months of your fixed rate term remaining).
The total interest payable for the remaining seven months at 5% p.a. would be compared to the interest payable at our current special six-month interest rate to determine whether an Early Repayment fee should be charged and the amount of that fee. If our current special interest rate for a six-month term was 4.5% p.a., we will receive less income as a result of your decision to repay or break the loan.
You would therefore be required to pay an Early Repayment fee being the difference between the two interest rates (0.5%) on $100,000, calculated for the remaining seven months of the existing fixed rate term, adjusted to recognise that we will receive the payment now, instead of over the term of the loan.
Partial repayment example: Your home loan is $100,000 on a two-year fixed special interest rate of 5% p.a. You choose to repay $50,000 on that loan after one year and five months (leaving seven months remaining on your fixed rate term). Because you have not paid any additional payments in this calendar year, the $10,000 permitted additional payment applies and any Early Repayment fee is calculated based on the remaining repayment amount of $40,000.
Your current interest rate would be compared to our current special six month interest rate to determine the Early Repayment fee to be charged.
If the current special interest rate for a six-month term is 4.5% p.a., then we will receive less income as a result of your decision to partly repay your loan early.
You would therefore be required to pay the difference between the interest rates (0.5%) on $40,000 ($50,000 less the $10,000) calculated for the remaining seven months of the fixed rate term, adjusted to recognise that we will receive the payment now, instead of over the term of the loan.
Please note: The explanation and examples above are simplified and the actual Early Repayment fee calculation is very complex. The result of the calculation depends on the specific features and terms of your home loan — it will not be the same for everyone and will change each day. We recommend you contact us for further information about the calculation and ask us for a quote before you look to repay or restructure your fixed rate loan.