Can You Break a Fixed-rate Home Loan

Break a fixed-rate home loan

Is it possible to end a fixed rate home loan early, and what will it cost you? The quick answer is yes. But, it may come at a cost. Called a fixed rate break cost, this normally applies when you want to terminate your home loan before its end period. This amount can be large, reaching thousands of dollars.

What is a fixed rate period?

When you take out a fixed-rate home loan, your interest rate and repayments will be locked in for a certain period of time. This means you know how much you need to repay each month and need not worry about rising interest rates. This certainty is beneficial as you would know how much you need to allot of your monthly income to your home loan repayment. The downside is that you don’t have as much flexibility to change your loan during the fixed-rate period.

What is a fixed rate break cost?

If you’ve come into some money and want to pay out all of your fixed-rate loans, you will need to pay a break cost. A break cost or break fee will also apply if you change your interest rate, repayment or loan type before the end of the fixed-rate period.

When will a fixed rate break cost apply?

During your fixed rate period, you may need to pay a break cost and administration fee if you:

  1. Split or switch your loan.

These fees will apply if you split your fixed-rate loan between fixed and variable rate. In addition, switching from a fixed rate to a variable rate or another fixed rate home loan will incur these fees.

  1. Top up your loan.

Increasing the limit of your fixed-rate home loan for extra funds may mean paying a break cost.

  1. Make extra repayments to pay off some of your loans early.

If you got a hold of extra cash and want to pay off your fixed-rate loan early, you will probably be asked to pay a break cost. This is also true if you make more than $10,000 of the allowed extra repayments annually.

  1. Pay off your entire loan early.

If you pay off your home loan in full during the fixed-rate period, you will need to pay a fixed rate break cost.

How can you avoid a fixed rate break cost?

If you want to pay off your loan faster, you can make extra repayments of up to $10,000 yearly without paying a fixed rate home loan break cost.

You can access extra funds by increasing or topping up your home loan. However, this will cause you to pay a break cost. Consider applying for a new home loan instead to avoid paying this fee.

What are the pros and cons of breaking a fixed rate home loan?

Breaking a fixed rate home loan comes with advantages as well as disadvantages.


  • There is a potential to gain thousands in interest rate savings
  • Can help lower monthly repayments
  • You’ll get the chance to adjust your home loan term
  • You can take out another loan under new terms and conditions


  • Break costs and other fees can add up quickly
  • Breaking a fixed rate home loan requires careful research and planning
  • Your new home loan may come with added terms and clauses

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