Refinancing can lower your monthly payment and total interest, but only when the monthly savings exceed the fees required to close the old loan and open the new one.
Identify the refinancing trigger
- Rate drop or margin improvement of at least 0.5–1.0 percentage point compared with your current deal.
- A long remaining term (5–7 years or more), which gives time for savings to outweigh closing costs.
- Approaching the end of a fixed-rate window, where a competing offer can lock in a better rate for another 5 years.
Compute the breakeven point
- Add all costs: prepayment penalty, notary/registry fees, appraisal, and mandatory insurance packages.
- Calculate the payment difference between your current mortgage and the new offer, including recurring banking fees.
- Divide total costs by monthly savings to find the number of months until refinancing pays back.
- Validate the breakeven in the refinancing calculator and stress test with optimistic and conservative rate scenarios.
Blend overpayments with refinancing
- Overpayments shrink your balance; refinancing cuts the rate or margin. Combining both accelerates payoff while reducing risk.
- Use the loan overpayment calculator to model monthly or lump-sum extra payments on your current loan.
- Re-run the refinancing model with the reduced balance to see how a pre-refinance overpayment improves loan-to-value and margin negotiation.
Actions before applying
- Check post-overpayment LTV; getting below 80% often removes costly low-equity insurance and lowers the margin.
- Compare fixed vs. variable options and test sensitivity to WIBOR/WIRON or similar benchmarks.
- Ensure cash reserves for 6–12 months of expenses so that fees and overpayments do not compromise liquidity.
Try the calculators
Tools
Prove the payoff before you refinance
Refinancing calculator
Model old vs. new installments, add closing costs, and see the breakeven month.
Quick refinancing check
Get a fast yes/no view with simplified inputs for rate, term, and fees.
Loan overpayment
Test monthly and one-time overpayments and how they shorten your payoff date.
Summary
- Refinancing pays off when rate improvements and a long remaining term outweigh all closing costs.
- The breakeven month is total costs divided by monthly savings; verify it with scenario testing in the refinancing calculator.
- Combining overpayments with refinancing often delivers the best mix of lower payments now and faster payoff later.