A lower home loan rate can look like an easy win. The real question is how much you will save after fees, timing and the remaining loan term are taken into account.

Good refinancing decisions are made with the full calculation, not the advertised rate alone.

Start With the Repayment Difference

Compare your current loan balance, rate and remaining term with the proposed new loan.

Look at both the monthly repayment and the total interest payable. A modest rate reduction may create a meaningful difference on a large balance, but the result depends on how long you keep the loan.

Add Every Switching Cost

Possible refinancing costs include:

• Discharge and settlement fees from your current lender

• Application or establishment fees for the new loan

• Valuation and legal costs, where charged

• Mortgage registration fees

• Fixed-rate break costs

• Annual package fees

• Lenders mortgage insurance, if required

Once these are added, calculate the break-even point:

Total switching costs ÷ estimated monthly saving = approximate months to break even

If you expect to sell or refinance again before that point, switching may not deliver the saving you expected.

Watch the Loan-Term Reset

Moving a 22-year balance into a new 30-year loan can reduce the monthly repayment, but it may increase the total interest paid because the debt remains for longer.

Where affordable, compare the new loan using the same remaining term as your current mortgage. You can then see whether the lower rate is genuinely reducing the cost rather than simply stretching it out.

Final Thoughts

Refinancing is worth considering when it improves the numbers without undermining your longer-term plan.

Prestige Finance Brokers can calculate the potential saving, compare the break-even period and help you assess the loan as a complete package.

General information only. Calculations are estimates and depend on future rates, fees and repayment behaviour.