Fixed Rate Mortgage Refinance: Exit and Break-Cost Checks

Yes, you can usually refinance a fixed rate mortgage during its fixed term, but breaking the term can trigger break costs. Obtain the current lender’s contract and a dated break-cost quote before telling your client what an early exit will cost.

A lower replacement rate doesn’t establish that refinancing is worthwhile. Compare the exit costs with savings over the remaining fixed term, then account for the client’s sale plans and need for cash.

Confirm the Fixed-Term Position

Confirm the client’s fixed-rate expiry and current balance before choosing an exit date. Record the requested change, remaining loan term and repayment type, including whether repayments cover principal and interest or interest only.

For a split loan, record each account separately. Identify which balance is fixed, which is variable and whether either account secures another property or guarantee. Include offset balances, available redraw and linked transaction accounts in the file.

Write down why the client wants to change. A rate reduction, property sale, larger repayment or need for accessible savings creates a different comparison. The fixed and variable home loan guide explains the underlying structures.

Refinancing during the fixed term involves an early exit. Reviewing a replacement loan before expiry can allow settlement after the term ends, avoiding an early break while preserving time for approval. The settlement date decides which position applies.

At expiry, the client still has a loan to repay. CommBank says its fixed loans usually roll onto the applicable standard variable rate unless the borrower chooses another fixed period, as at October 2026. Its fixed-rate explanation describes that change.

Record the client’s actual revert rate from their expiry notice or lender confirmation. Include any days between expiry and replacement settlement at that rate, even when the original plan was to refinance immediately.

Check Break Costs and Contract Limits

Use the lender’s quote for the proposed change and date, because the balance and remaining fixed term affect the cost. Changes in wholesale rates can also change the quote. A difference between advertised home loan rates cannot tell you the client’s break cost.

CommBank’s Early Repayment Adjustment (ERA) guide, as at October 2026, says its quote is valid only on the day issued. It lists switching to variable, topping up and paying out early as break events. An administrative fee can apply even when no ERA is payable.

National Australia Bank (NAB), as at October 2026, says an economic-cost quote is valid for seven days. Its fees guidance names closing the loan or ending the fixed period early as possible triggers. Use the break-cost guide for the mechanism behind these charges.

Request the quote for the exact fixed account and proposed payout or partial repayment. Retain its issue date, validity period and treatment of administrative fees. Refresh it when the settlement date or proposed amount changes.

Extra Repayments and Access to Cash

Yes, extra repayments can be permitted on a fixed loan, within the contract’s allowance. Count repayments already made in the relevant allowance period before suggesting another payment.

CommBank’s ERA guide permits up to $10,000 in extra repayments each fixed-rate year without an ERA, as at October 2026. That year starts when the fixed term begins, rather than on 1 July. Those extra payments cannot be redrawn during the fixed term.

For example, a CommBank client who has already paid $7,000 extra in that year has $3,000 of that allowance left. A further $5,000 exceeds it. Retaining cash for a purchase deposit might therefore suit the client better than paying the full amount into the fixed account.

Treat offset access and redraw as separate contract features. An offset account reduces interest only where the product permits it. Redraw concerns access to extra repayments already paid into the loan.

Sale, Portability and Discharge Timing

Selling during a fixed term can require a payout that triggers break costs. Where the client is buying again, an approved security swap can preserve the existing loan while changing the property securing it.

Australia and New Zealand Banking Group (ANZ), as at October 2026, says its security swap requires credit assessment. Borrower names must stay the same and the borrowing amount must stay the same or decrease. Settlements generally occur together, although approved temporary term-deposit security can accommodate a sale settling first.

ANZ’s security-swap guide warns that a required debt reduction can still attract an early repayment charge. These ANZ options exclude ANZ Plus products. Include security-swap fees and the proposed debt reduction before comparing portability with discharge.

NAB’s personal mortgage discharge checklist, as at October 2026, requires at least 10 business days to process the form. NAB can cancel redraw from the morning of the business day before settlement. Arrange any required access to funds before that restriction applies.

A quote’s validity and a discharge processing period are different clocks. Lodge complete discharge instructions in time and obtain the cost applicable to the eventual settlement date.

Compare Refinance, Sale, Repayment and Waiting

Compare each feasible route from the same assessment date, using the same balance and comparison end date. Keep the client’s objective beside the cost, because selling or retaining accessible cash changes what a successful outcome means.

Route	Costs and conditions to include	When it can fit
Wait until expiry	Existing repayments, any revert-rate period and later replacement costs	Early exit costs exceed the benefit of moving now
Refinance now	Dated break quote, discharge, new-loan fees and credit approval	Savings and useful features justify the costs before the next planned change
Sell during the term	Payout figure, break costs, discharge and sale settlement date	The property must be sold before expiry
Make an allowed extra repayment	Remaining allowance, resulting balance and reduced access to cash	The client has surplus cash they won’t need during the fixed term
Restructure with the current lender	Variation fees, any break charge and changed repayment or product terms	A change within the lender meets the client’s need
Swap security for a new home	Assessment, settlement coordination, fees and any required repayment	The existing loan still fits and the lender approves portability

NAB’s refinance cost guide, as at October 2026, identifies exit and establishment costs. It also lists government charges and ongoing loan fees. Include valuation, settlement and mortgage-registration costs where they apply to the proposed offer.

Yes, changing a variable loan to fixed is a possible restructure, subject to the lender’s available products and terms. It creates a new fixed commitment. For a split loan, fixing the variable portion doesn’t remove the existing fixed portion’s expiry or break conditions.

Keep approval timing visible. A promising offer cannot fund a payout until the new lender’s conditions are met and settlement is ready. The refinance requirements guide covers the wider application process.

If settlement slips beyond expiry, update the model for the revert-rate period. If the client intends to sell soon afterwards, shorten the savings period and include any exit cost on the replacement loan.

Model the Client’s Net Position

Model cash repayments and remaining debt separately, because a lower repayment can also reflect a longer loan term. Use the same remaining term first, then show any requested extension as a separate option.

This fictional comparison is assessed on 3 October 2026 for settlement on 1 November 2026. The fixed term expires on 1 November 2027. Both options start with $600,000 owing and 25 years remaining, with monthly principal-and-interest repayments.

The assumed existing rate is 6.50% a year and the replacement rate is 5.80% a year. Both rates remain unchanged throughout the 12-month comparison. The figures use monthly amortisation and exclude daily-interest differences and rounding adjustments.

Assume the fictional lender’s dated quote is $2,000 to break the term. Add an assumed $350 discharge cost and $450 application cost. Total upfront costs are $2,800, paid from cash rather than added to the new balance.

These amounts are invented inputs, not a lender quote or estimate of any client’s break cost. Assume there are no other fees, offset balances or extra repayments in either option.

Measure over 12 months	Keep the fixed loan	Refinance on 1 November
Starting balance	$600,000	$600,000
Assumed annual rate	6.50%	5.80%
Monthly repayment, rounded	$4,051.24	$3,792.79
Total scheduled repayments, rounded	$48,614.92	$45,513.46
Balance after 12 payments, rounded	$590,093.40	$588,997.10
Upfront costs paid from cash	$0	$2,800

The monthly repayment difference is about $258.45. Using unrounded figures, the 12-month cash saving is $3,101.45 before costs, or $301.45 after the $2,800 upfront payment.

For a simple cash-flow break-even, divide upfront costs by the monthly repayment saving. Here, $2,800 divided by about $258.45 is 10.83 months, so cumulative savings exceed costs after the eleventh monthly payment.

The replacement balance is also $1,096.30 lower after 12 payments. Adding that debt reduction to the net cash saving gives a $1,397.76 improvement in cash plus debt position, using unrounded figures.

This outcome depends on the assumed rate and actual settlement date. A larger break quote, extra fees or an earlier sale can erase the cash benefit. If costs are borrowed, recalculate repayments and interest on the higher starting balance.

A repayment reduction caused by resetting the loan to 30 years needs a different comparison. Show the remaining debt and total interest consequence before describing that reduction as a saving. Repeat the model when a variable replacement rate changes.

Prepare the Refinance Decision

Prepare a file that links the selected route to the client’s objective and the figures used in the comparison. Retain the documents below so another broker can follow the decision without reconstructing the assumptions.

Evidence	What the broker confirms
Current contract and recent statements	Fixed account balance, remaining term, repayment type and linked facilities
Fixed-rate expiry notice	Expiry date, revert rate and next scheduled repayment
Dated break-cost quote and payout figure	Proposed date, validity, fees and amount required to settle
Extra-repayment history	Allowance period and remaining permitted payment
Property value and security details	Proposed loan-to-value ratio, affected properties and guarantee releases
Income, expenses and liability evidence	Serviceability, meaning the client’s ability to afford the proposed repayments
Replacement offer and conditions	Rate basis, fees, loan term and outstanding approval requirements
Sale or security-swap documents	Settlement dates, property assessment and lender-approved arrangements

Compare the replacement lender’s policy with the client’s circumstances before committing to an exit. Bulma helps brokers check policy across 52+ lenders and retain the wording behind each answer. Obtain rates, fees and the actual break-cost quote from the lenders.

Record the chosen route, the client’s reason for choosing it and the last date on which its quoted assumptions apply. Assign the discharge and settlement actions to named people. Schedule the next review before quote expiry, fixed-term expiry or an offer deadline, whichever affects the decision first.

If the replacement lender declines or approval conditions remain outstanding, keep the existing repayment arrangement and reassess waiting or restructuring. If settlement moves, refresh the payout and cost comparison before proceeding. After settlement, verify the old loan payout, the new balance and the first repayment against the approved plan.