Break fee

A break fee (break cost, or early repayment recovery) is the amount a lender charges when a fixed-rate loan is repaid, refixed or restructured before the end of its fixed term.

How it is calculated

Broadly, the lender's loss from having to re-lend the money at a lower rate than you agreed to pay. If market rates have fallen since you fixed, the break fee can be substantial. If rates have risen, it may be minimal or nil.

Calculation methods differ between lenders and are not always transparent.

When investors encounter it

Selling before the fixed term ends. Refinancing to another lender. Restructuring to release equity. Making a large lump sum repayment.

Common misunderstanding

Always request the break cost in writing before committing to anything. It can be tens of thousands of dollars on a large loan, and it has derailed sales and refinances that otherwise made sense.

It is not a penalty and it is not negotiable in the usual sense — it is a calculated recovery of the lender's actual loss. But the figure changes daily with market rates, so timing matters.

Splitting lending across several fixed terms limits exposure, since only the portion being broken attracts a fee.

Related terms

Last reviewed: 1 August 2026 · General information only, not financial advice.

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