Getting out of a fixed rate home loan

[Fab]

I have a friend who fixed 75% of his $500 000 mortage 1 year ago at 7.83%.He fixed it for 5 years with one of the big 4 banks. Now he is about to lose his job , the investment property he bought recently has lost over 25% of his value and the bank is asking him 34k to get out of the fixed part of his loan.
Is there something he could do to get out of this bad situation ?

Cheers

[prawn_86]

Sell up everything and buy or rent what he can afford without debt...

[investorpaul]

Quote: Originally Posted by Fab I have a friend who fixed 75% of his $500 000 mortage 1 year ago at 7.83%.He fixed it for 5 years with one of the big 4 banks. Now he is about to lose his job , the investment property he bought recently has lost over 25% of his value and the bank is asking him 34k to get out of the fixed part of his loan. Is there something he could do to get out of this bad situation ? Cheers

[Glen48]

If he sells everything he gets out of the loan or do the Banks want the extra as well?

[knocker]

Sounds like your mate is in for some problems. If he is out of work i think it is possible to access your super annuantion. He can get forms from centrelink

[robots]

Quote: Originally Posted by Glen48 If he sells everything he gets out of the loan or do the Banks want the extra as well?

[Rainmaker2000]

I sure doubt he can access super to pay a home loan............this is a terrible story but unfortunately just the beginning for many aussies as the devaluation of the stock market (over 50% now from top) flows through to the relative devaluation of people's labour and then personal assets like housing which is mainly a function of wages................

Here is one strategy that helps in some of these cases........depending on the conditions of the loan, many fixed rate loans allow additional repayments (sometimes for fee) and the only condition of the fixed loan is that you retain a fixed loan (which could be 2$)

So thus, your friend in this instance could arrange a temporary second mortgage at a lower rate to make additional repayments on the first one.......it's not lovely but can work as long as he didn't get a straight jacket mortgage in the first place.....

Your friend really needs to learn from this about investments, fundamentals and interest rate cycles.......those heavily into the stock market have learnt a lot in the last year......the key is we are still alive and still mixing it up.......your friend made some big mistakes here...........

[nunthewiser]

OFF TOPIC . apologies.........

dear rainmaker are you the same rainmaker/rainman? from commsec many years ago m8 ?

[drsmith]

Quote: Originally Posted by Fab I have a friend who fixed 75% of his $500 000 mortage 1 year ago at 7.83%.He fixed it for 5 years with one of the big 4 banks. Now he is about to lose his job , the investment property he bought recently has lost over 25% of his value and the bank is asking him 34k to get out of the fixed part of his loan. Is there something he could do to get out of this bad situation ? Cheers

[Rainmaker2000]

hehe, not the same dude.....how I would love to have been heavily in the stocks right through the tech. reck.........would have learnt a lot.......and I doubt I would have made the mistakes many made..........I would have picked one of my favourites, Fantastic furniture on a float for 40 cents as well......

[Glen48]

I say sell and buy back after the crash.

[BigAl]

Breaking a Fixed Rate Loan....

Let me put it to you another away.

What if rates skyrocketed up? And the bank approached you and said, "We miscalculated... we're in hard times... profits are down... we respectfully request the fixed term be broken".

What would be your response to this?

"A contract is a contract... up yours... you don't have a leg to stand on... suck it up".

So in the reverse, whats the banks response going to be?


Your mate gambled, and lost. If rates had gone the other way, he'd be laughing and the rest of us would be sucking humble pie. That's life.


And in no way shape or form do I work or know anyone in the finance industry.