What are break costs all about?

Which brings us to another interesting topic when you discuss fixed interest rate mortgage loans and thats the subject of the thing called break costs. Its interesting because the term Break Costs in relation to fixed interest rate home loans is clearly brought to your attention by the mortgage lender when you deal with these types of mortgage loans. But, in most cases they never clearly explain when and how they work other than saying you will be penalized with break costs if they suffer an economic loss when discharging a fixed interest rate loan prior to the agreed fixed interest rate term. In reference to most mortgage lenders it means if you discharge the loan prior to the agreed fixed interest rate term and in the meantime interest rates have gone up in the market theyll be able to re-lend the mortgage loan you discharged at a higher interest rate. Therefore, they will have suffered no economic loss. But if interest rates have gone down in the interim theyll have to re-lend the ...  more