What is a pre-payment fee?
A prepayment fee may apply to extra repayments you make over and above the 5% threshold.
A fee only applies if the current rate we could relend those funds at for the remainder of your fixed term is lower than the rate your loan is fixed at.
The fee, if applicable, is charged to your loan account at the end of the month that the extra payment is made.
When this fee does apply, it will only represent a small portion of the interest you may save by making the extra payment.
Even though your loan will be debited with a fee, it may still be beneficial to make the extra payment and reduce the interest charged to your loan.
Please take into account your own individual circumstances when making any extra payments.
Example 1 – no pre-payment fee
- Original loan amount: $150,000 fixed for 3 years @ 7.0% p.a.
- Extra payments made that month: $6,500
In this example, no prepayment fee will apply.
The total amount of extra payments is less than 5% of the original loan amount ($7,500).
Example 2 – pre-payment fee applies
- Original loan amount: $150,000 fixed for 3 years @ 7.0% p.a.
- Extra payments made that month: $9,000
- Remaining Fixed Period: 2 years
- Current 2 year Fixed Rate: 6.75% p.a.
In this example, a prepayment fee will apply.
The total amount of extra payments is greater than 5% of the original loan amount and the current fixed rate for the remaining fixed period of the loan is lower than the rate that the loan is fixed at.
Note: Pre-payment fees don’t apply to an extra repayment on a variable rate home loan.