Glossary
Break costs
What a lender charges to exit a fixed-rate facility early, calculated from the rate movement rather than set as a fee.
In plain English
When a facility is fixed, the lender has funded its own position at the rates available then. Repaying early leaves the lender holding funding it no longer needs, and break costs recover that shortfall.
They are a calculation, not a published fee, so they cannot be looked up in advance. The size depends on how much of the fixed term is left and how far rates have moved since it was set. Where rates have fallen, break costs can be large; where they have risen, they can be close to nil.
Why a lender cares
Any refinance of a fixed facility has to be modelled with break costs in it, because they are paid up front against a benefit that arrives monthly. Ask the lender for an indicative figure in writing before deciding anything: it changes daily, and a refinance that works at one figure can fail at another.
Reading up because a deal or a facility is on the table? One call with Nicholas gets you a straight read on your numbers, free.
Book a call