Should I break my fixed rate loan?
Breaking the fixed rate period for your loan may seem like an easy way to save money when circumstances change. However this can have big financial implications due to the ERA cost, so it’s worth discussing your options with a lending specialist first. The best option depends on your individual circumstances. Here are some things to consider:
Short term versus long term financial implications
If you are considering breaking your fixed interest rate period to switch to a lower interest rate, it’s important to weigh up the ERA cost against the benefit of lower repayments. You should also consider whether breaking your fixed interest rate period will give you interest savings in the long run.
Paying for the ERA
An ERA can be costly, so you need to consider how you’ll pay it. If you can’t pay the ERA cost immediately, you may be able to add the cost to your loan as an addition to the principal sum borrowed. ASB’s lending criteria will apply and a one-off processing fee may also apply if you want to borrow more money. This option should be considered carefully as you’ll be adding to the total amount outstanding under your loan which will increase the amount of interest you’ll pay. Such considerations may outweigh the immediate benefit of lower repayments.
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There are advantages and disadvantages to all of these options and you need to consider your personal circumstances when deciding. ...