Fixed-rate mortgages and making a lump-sum deposit

Please note this sub-forum does not provide professional finance advice. You should seek advice from a licensed financial advisor.

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification.

If investing please consider our affiliate link for new accounts: Sharesies.

Forums › Finance and wealth management › Fixed-rate mortgages and making a lump-sum deposit

GeoffisPure

459 posts

Ultimate Geek

#295870 30-Apr-2022 20:11

Just wondering if anyone has heard of this...

My bank (ANZ) allows mortgage holders with fixed-rate loans to make one additional lump-sum payment per year (so long as it's not more than 5% of the loan).

I had been putting aside a small amount that I had intended to pay in a lump sum at the end of April (my re-fixing date is May 1st).

When I called today to make the payment, they told me I was not allowed to make a lump sum payment because I had already reserved my interest rate for the next loan period. They said any lump sum I made now would invalidate that rate I'd locked in.

My question is - why does that matter? I can make a lump sum payment at any time during the year, but not in the last month because I had been organised and locked in my next rate? I guess I'm just annoyed that I wasn't made aware of this restriction. I know it's not a huge deal to wait for the next term to make my payment... but I had hoped to make lump sum deposits both in the current and next loan years.

insane

3223 posts

Uber Geek

ID Verified

Trusted

#2908825 30-Apr-2022 20:52

You'd have to refer to the terms you signed up to - sounds like a load of BS to me. Can you do it online?

Linux

11293 posts

Uber Geek

Trusted

Lifetime subscriber

#2908907 1-May-2022 08:56

Surly you must be able to do this online without calling the bank? bnz it is done in the App / internet banking in the matter of seconds

GeoffisPure

459 posts

Ultimate Geek

#2908912 1-May-2022 09:04

Linux:

Surly you must be able to do this online without calling the bank? bnz it is done in the App / internet banking in the matter of seconds

If it were a floating loan you can do it online, but if you're fixed it needs to be done over the phone :(

Linux

11293 posts

Uber Geek

Trusted

Lifetime subscriber

#2908915 1-May-2022 09:11

GeoffisPure:

Linux:

Surly you must be able to do this online without calling the bank? bnz it is done in the App / internet banking in the matter of seconds

If it were a floating loan you can do it online, but if you're fixed it needs to be done over the phone :(

@GeoffisPure I am on fixed with bnz to August 2023 and make topup payments quite often never charged once

Bung

6395 posts

Uber Geek

Subscriber

#2908920 1-May-2022 09:30

I think ANZ was the magic word.

Mehrts

1055 posts

Uber Geek

Trusted

#2908921 1-May-2022 09:31

@Linux are you absolutely sure that's for a fixed loan?

I'm also with BNZ, and the only option I have with my fixed loan is to change my "regular repayment" amount, no option at all for unscheduled/top-up payments. These options only exist with the floating loans.

In saying that, I can bump up my regular repayments by another few hundred dollars a fortnight without any extra charges.

Linux

11293 posts

Uber Geek

Trusted

Lifetime subscriber

#2908925 1-May-2022 09:56

Mehrts:

@Linux are you absolutely sure that's for a fixed loan?

@Mehrts Screen shot from the App

GoodSync

GoodSync. Easily back up and sync your files with GoodSync. Simple and secure file backup and synchronisation software will ensure that your files are never lost (affiliate link).

Linux

11293 posts

Uber Geek

Trusted

Lifetime subscriber

#2908927 1-May-2022 10:00

@mehrts Just did this in the bnz App, Early repayment of 100k

" Make a lump sum payment "

eracode

Smpl Mnmlst
8766 posts

Uber Geek

ID Verified

Trusted

Subscriber

#2908930 1-May-2022 10:37

The following is OT because the OP is talking about a repayment of less than 5% of the loan amount each year - which is normally exempt from an Early Repayment Charge (ERC). However:

There is not necessarily and automatically an ERC for lump-sum payments against fixed rate loans - it depends on the relativity of rates.

Assume a five-year fixed rate of 5% which started on 01.01.20 and ends on 31.12.24. Then you want to repay a chunk of the loan (more than the standard 5% of principal exemption) on 31.12.22 - when the fixed arrangement still has two years to run. In simple terms, if the current 2-year home loan rate is lower than 5%, an ERC will arise. If the current 2-year home loan rate is higher than 5%, an ERC will not arise.

It’s all about whether the bank will make a gain or a loss on re-lending the amount you’re repaying, in comparison to what you had agreed to pay them for five years. This arises due to the way the banks 'match fund' their balance sheets. When you take a five-year fixed rate, (theoretically) the bank funds this lending with a matched five-year fixed borrowing. If you repay two years early, the bank is potentially left hanging in the breeze for the remaining two years.

Sometimes I just sit and think. Other times I just sit.

nztim

3754 posts

Uber Geek

ID Verified

Trusted

TEAMnetwork

Subscriber

#2908936 1-May-2022 11:15

ANZ let you pay down no more than 5% of the balance without penalty once per year, its a phone call, not possible via app or internet banking

Any views expressed on these forums are my own and don't necessarily reflect those of my employer.

mudguard

2102 posts

Uber Geek

#2908938 1-May-2022 11:23

Could you not let the loan float for one day and pay it down then? I realise you want to lock a rate in, but how does the maths stack up locking a rate in on a higher amount vs a lower amount at a higher rate?

esawers

551 posts

Ultimate Geek

#2908949 1-May-2022 12:31

We are with ANZ
Recently we reduced the mortgage and then paid 5% the day after the refix started, no problems

nova

243 posts

Master Geek

Trusted

#2908951 1-May-2022 12:58

Mehrts:
I'm also with BNZ, and the only option I have with my fixed loan is to change my "regular repayment" amount, no option at all for unscheduled/top-up payments. These options only exist with the floating loans.

I'm also with BNZ, and have three separate loans, one fixed and two offset loans. Interestingly I can make early repayments through the app on the fixed loan, and one of the offset loans, but not on the other offset loan. The difference seems to be that the loans I can make repayments on were setup last year, and the one that I can't was setup 10 years ago.

No early repayment charge for the fixed loan because interest rates have gone up, but if you had just re-fixed the loan, I could see why that could be a problem.