Mortgage break fees

[m78]

Hi
First time posting here. Hoping someone here has a better understanding of mortgage break fees than I do (which wouldn't be hard).
Intend to repay a mortgage (~$400k) in next few months.
Locked in a 5 year rate at 5.95% approx 2.5 years ago, so another 2.5 years to run.
Rates for 5 year money have obviously decreased since then.
Questions I'd appreciate views on;
1) Would a break fee typically be payable in these circumstances (given that rates have decreased so I'm already "out of the money").
2) Have people had success negotiating out of break fees (i.e. do banks take wider relationship view etc if I have a bit of leverage versus I pack up and go elsewhere - bank in question is ASB).
3) Anyone got experience with a change of security in these circumstances? I'd need to purchase another property to do it but that is possible and could be sensible (for a number of reasons) including the avoidance of a large break fee if applicable. Added complication is that I would want to use another structure from the Trust which has the existing mortgage. Anyone know if banks have flexibility to change both security and borrower (to a related party) without breaking fixed rate?
Appreciate any insight here.
Cheers

[Wayne]

1 - yes, the bank will want some money
2 - a while back you could sometimes get another bank to effectively cover the break fee when you moved. Not sure if this is applicable now.
3 - changing security does happen but you are getting complicated with a change of borrower as well. Talk to your bank but I'd think it unlikely.

[MichaelKarabassis]

Hiya M78,

Great questions, and Wayne has summed it up perfectly.

My experience is that around 400k locked in at that interest rate with that amount of time left, it will probably be around a 2.5-3k break fee.
But that's of course only based on my recent clients with around about the same situation.

Another bank will possibly help pay for your break fee's but may not give you any extra cash contribution for the refinance costs. Refinance is around 6-700 + gst, again this is dependent on your lawyer.

Yes as an ex banker, it may be possible to switch the lending a borrower without paying a break fee, but this will depend on the bank and the change of structure position.

Any questions or if you want me to organise and do the negotiation for you, just give me an email or call.

Good luck regardless,

[Nick G]

When you lock in a loan with the bank they in turn lock it in with their funding - that is how the bank never really loses money.

So you need to pay their penalty to exit that secondary contract. Plus they put some premium on top of that, another reason the bank doesn't lose money.

[m78]

Thanks for all your replies much appreciated - if my break fee works out to be circa $3k then it's quite a bit less than I was expecting and negotiating the fee and/or a change of security becomes less of an issue (although still worth a crack!)
cheers

[Rosco]

Hi m78,

Why don't you ask the bank what the break fee is?

And how they would treat the loan if you move it to another property?

This then gives you some facts to start with. Once you know the facts, then you can work on solutions or try to improve the situation. At the moment you are just guessing.

Ross