Break Cost Fee

Break Cost Fee (BCF)

A Break Cost Fee (“BCF”) may be payable if you repay your loan, or if you make an additional repayment, during any period in which your loan interest rate is fixed. 

The BCF is based on the difference between the Fixed Rate, i.e. the interest rate for your fixed interest rate contract, and our Reinvestment Rate, which is the interest rate that we can reasonably expect to earn on any amount that is repaid early.

The BCF reflects the cost incurred by us if the Reinvestment Rate is less than the Fixed Rate at the date of repayment.

The minimum BCF is zero. We will not pay a refund for any advantage gained if the Reinvestment Rate exceeds the Fixed Rate.

Repayments not subject to Break Cost Fee

We will waive the BCF if your total additional repayments during any year (starting from the anniversary of your fixed interest rate period) do not exceed 10% of your original loan balance.

If your additional repayments exceed 10% of your original loan balance in any year, the BCF will apply only to the repayments in excess of 10% of your original loan balance.

Calculation of BCF

The BCF will be calculated using the following steps:

1. The proportion of your loan balance that is being repaid subject to BCF will be calculated as: Proportion = (Repayment – Tolerance)/ Balance.
2. The interest that would be lost to us if you fully repaid your current loan balance will be calculated as: Amount (1) = Balance x Years x (Fixed Rate – Reinvestment Rate).
3. An interest offset based on your expected future loan instalments will be calculated as: Amount (2) = Interest x N x (Fixed Rate – Reinvestment Rate) x Years / 
4. Your BCF will be calculated as: Proportion x [Amount (1) – Amount (2)].

The BCF cannot be less then zero

Definitions

Balance is your total loan balance outstanding after any regular scheduled repayments, but before your additional repayment.

Fixed Rate is the fixed interest rate (% pa) applicable to your loan contract.

Instalment is the regular loan instalment you have been paying each week, fortnight, or month, at the date of repayment. 

N is the number of whole instalment periods (weeks, fortnights, or months depending on your instalment frequency) remaining in your fixed interest rate term, at the date of repayment.

Reinvestment Rate is the interest rate (% pa) that we can reasonably expect to earn on any amount that is repaid early. This rate will be determined as our interest rate at the date of repayment for a fixed interest rate loan with a term equal to Years, or the nearest term less than Years for which we offer fixed interest rate contracts. If there is no such fixed interest rate, then Reinvestment Rate will be taken as our standard variable interest rate at the date of repayment. 

Example

If at the date of repayment, we offer fixed interest rate contracts for terms of one, two, or three years, then Reinvestment Rate will be based on the value of Years as follows: