The real cost of refinancing, worked out first

A lower rate elsewhere is easy to find. Whether moving to it saves you money depends on what it costs to get there, and how long you'll stay.

The cost of leaving your current loan

• Discharge fees. Your current lender charges to close the loan, and there's a state government fee to remove the mortgage from your title
• Break costs. On a fixed rate, leaving early can trigger break costs, which can be substantial when rates have fallen since you fixed
• Exit fees. These were banned on new home loans from 1 July 2011, but discharge fees and break costs weren't

The cost of the new loan

• Application or establishment fees, though many lenders waive them for refinancers
• Valuation fees, where charged
• Government fees to register the new mortgage
• Lenders mortgage insurance, again, if you'd be borrowing more than 80% of the property's value. LMI paid on your current loan generally doesn't transfer

Work out the break-even

Add up the switching costs and divide by what you'd save each month. If switching costs $1,500 and saves $150 a month, you're ahead after ten months. If you might sell or refinance again before then, it may not be worth it.

Ask your current lender first

Lenders often offer new customers sharper rates than existing ones. Asking yours to reprice, particularly with a competing offer in hand, sometimes gets most of the saving without moving at all.

Look past the rate

• Whether the new loan has an offset account or redraw, and whether you'd use them
• Package fees for features you may not need
• Resetting the term: going back to 30 years lowers the repayment but can add years of interest
• The new lender assesses you under today's rules, so check you still qualify before you count on the saving

Where we come in

We cost the switch before you apply: what it costs to leave, what it costs to arrive, how long until you're ahead, and whether your current lender will match it. See today's indicative rate.

General information only. This article does not take into account your objectives, financial situation or needs, and it is not personal financial, legal or taxation advice. Lending criteria, fees and conditions apply, and all applications are subject to lender assessment and approval.