EBS breakage fee calculation.
- Thread starter Aph2016
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The Oggster
Registered User
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What do you need help with?
A is the amount you're paying off the loan. Or if you want to end the fix rate, it's the full balance.
U is the term remaining of the fixed rate, in years.
D is the difference in the cost of funding. This is harder to work out than the way AIB do it. You will have to ask the bank for this figure and it can change daily.
There will only be a fee due if the cost of funding is lower now than it was when you took out the loan.
If you fixed at a low rate, then the chances are there will be no fee.
The text at the end of your post is from your copy and paste. You many want to delete that to avoid any confusion.
A is the amount you're paying off the loan. Or if you want to end the fix rate, it's the full balance.
U is the term remaining of the fixed rate, in years.
D is the difference in the cost of funding. This is harder to work out than the way AIB do it. You will have to ask the bank for this figure and it can change daily.
There will only be a fee due if the cost of funding is lower now than it was when you took out the loan.
If you fixed at a low rate, then the chances are there will be no fee.
The text at the end of your post is from your copy and paste. You many want to delete that to avoid any confusion.
BigPineapple
Registered User
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- 123
I think the keyword here is highlighted below. As far as I can interpret, it is the difference between the rate you borrow at the time you took out the mortgage versus the rate you would get today (from EBS) for the remaining period you have left.
So if there is 2 years left as per the example above, you'd be looking at 4.90%.. I would expect it to be a negative number in this scenario so would be zero.
It would be best for you to get EBS to confirm your fee just to make sure if it is interpreted corrected and that you can replicate the calculated value they give you.
So if there is 2 years left as per the example above, you'd be looking at 4.90%.. I would expect it to be a negative number in this scenario so would be zero.
It would be best for you to get EBS to confirm your fee just to make sure if it is interpreted corrected and that you can replicate the calculated value they give you.
Cost of funds is not directly related to current mortgage rates. It refers to the cost at which lenders, EBS in this case, could fund their activities. In the case of a fixed rate mortgage it's likely a swap rate.
Swap rates -where one side offers a variable rate in exchange for a fixed rate - reflect expectations about future interest rates.
The break fees lenders charge are now regulated and must reflect actual costs faced by banks. If by breaking out of a fixed rate a lender incurs a cost they are entitled to pass it on. However, if market rates have moved in the intervening period and no loss is incurred then no break fee is allowed.
While you would expect current mortgage rates to reflect funding costs other factors are at play when it comes to pricing. So you can't infer with any accuracy what a break fee will be by looking at changes in mortgage rates.