About this calculator
A fixed-rate loan is a contract to buy money at a set price for a set period. If you exit early — refixing lower, switching banks, or selling the house — the bank unwinds that contract in the wholesale market, and the loss lands with you. The standard method every New Zealand bank discloses compares two streams over the months left on your fix: the interest you agreed to pay at your contract rate, versus the interest the bank can now earn lending the same balance for the same remaining period at today's wholesale rate. The difference, adjusted back to today's dollars, is the break fee (banks call it an early repayment adjustment). This estimator runs exactly that maths on your amortising balance.
Now the honesty this topic demands. Banks do not use the retail rate you see advertised — they use wholesale swap rates observed on the day you break, their own day-count and discounting conventions, and the balance pattern of your actual loan; then they add an administration fee. The result is that two banks can quote different fees for the same loan on the same day, and your own bank's quote tomorrow will differ from today's. Treat the number here as the right order of magnitude for a decision — "is breaking roughly worth it?" — never as the amount on the settlement statement. If wholesale rates have risen since you fixed, the differential runs the other way and the fee is typically zero: the bank can re-lend your money for more, so there is nothing to compensate.
How to use it
- Enter the balance on the loan portion you would break (split loans: model each fixed portion separately).
- Enter your contract rate and a realistic current rate for the remaining period — a quoted refix rate for that term is the closest retail proxy for the wholesale rate, though the bank's is usually a little lower.
- Enter the months left on the fix and the total loan term (the balance amortises over the term, which shrinks the fee slightly).
- Read the discounted estimate as your planning number and the undiscounted differential as the ceiling of the range. Then get the bank's same-day quote before acting.
The formula
The balance declines on your amortisation schedule at the contract rate, so later months contribute less. Discounting reflects that the bank receives the fee today for interest it would have collected over time. The simple headline approximation — balance × rate gap × years remaining (here $500,000 × 2.5% × 3 = $37,500) — overstates the fee because it ignores both the shrinking balance and discounting; the full method gives about $34,200 on the default figures.
Worked example
You fixed NZ$500,000 at 7.00% with three years left, and rates for that term are now around 4.50% — a 2.5-point gap. The crudest estimate (balance × gap × years) says NZ$37,500; run properly over the remaining term on the amortising balance the differential is NZ$36,634, and discounted to today the estimated fee is NZ$34,228 — roughly 6.8% of the balance. Worth it only if the lower rate saves more than that over the new fix (here, refixing the whole balance at 4.50% saves about the same differential over three years, so the gain is in the years after the old fix would have ended anyway — which is exactly the comparison to run). A smaller gap bites less: NZ$300,000 at 6.50% versus 6.00% with one year left comes to about NZ$1,436.
Sources: Method follows the early-repayment adjustment formulas New Zealand banks disclose under the Code of Banking Practice. Estimates are indicative only — break fees have no published official rate source, by design of the market. Last updated: October 2026.
Frequently asked questions
Why won't my bank quote the same number as this estimator?
Because every input is theirs, not yours. The bank uses the wholesale swap rate for your exact remaining term on the day of the quote, its own formula (the Code of Banking Practice requires it to disclose a reasonable estimate basis), interest calculated on its day-count convention, and the actual repayment pattern of your loan — interest-only periods or lump sums change the balance path. Add an administration fee on top. The estimator tells you whether the fee will be hundreds, thousands or tens of thousands; only the bank can tell you the amount to the dollar.
When is a break fee zero?
When wholesale rates today are at or above your contract rate for the remaining term — the bank can re-lend the repaid money for as much or more, so there is no loss to recover. Most banks then charge only a modest administration or discharge fee. This is why break-fee pain concentrates in falling-rate periods: the same market move that makes a lower refix tempting is the one that makes leaving expensive.
Can I avoid the fee by waiting or restructuring?
Often, partly. Waiting until the fixed term expires is free, and every month that passes shrinks the fee because there is less term left. Some borrowers split the difference: repay extra principal (within the loan's free repayment allowance, commonly around 5% of the balance a year on fixed loans) to cut the balance the fee is charged on, or break only one portion of a split loan. Selling the house does not dodge it — the loan must be repaid at settlement, and the fee is assessed then.
Is the break fee tax-deductible for a rental property?
For a landlord, break fees are generally deductible against rental income as a cost of the borrowing, like the interest itself — but the bright-line and ring-fencing rules have their own wrinkles, and owner-occupiers get no deduction. Get advice on your facts; IRD treats the fee as part of the loan arrangement, not as a penalty, which is what drives the treatment.
What if I'm breaking because of hardship?
Tell the bank before the fee becomes the problem. Lenders have hardship processes under the responsible-lending code — a rate fix can sometimes be held, restructured or partially broken on hardship grounds, and the fee is one of the things on the table. A borrower in hardship negotiating early is in a far stronger position than one who has already committed to a sale or a refinance elsewhere.
What formula does this nz mortgage break fee estimator — fixed-rate break costs calculator use?
Break fee ≈ Σ over remaining months of [ balance(month) × (contract rate − current rate) ÷ 12 ], each month discounted at the current rate The balance declines on your amortisation schedule at the contract rate, so later months contribute less. Discounting reflects that the bank receives the fee today for interest it would have collected over time. The simple headline approximation — balance × rate gap × years remaining (here $500,000 × 2.5% × 3 = $37,500) — overstates the fee because it ignores both the shrinking balance and discounting; the full method gives about $34,200 on the default figures. The worked example on this page applies the formula step by step with real numbers, so you can verify the result by hand.