Interest rates have dropped… should I refinance my loan?
First things first — you need to look beyond the interest rate.
I know that sounds wrong, right?
But whenever you’re considering a refinance, it’s essential to calculate the true cost difference, including both interest and fees. Just looking at the advertised rate isn’t enough.
Let’s look at a real calculation I ran recently for my client Lisa.
Lisa has an investment loan with a balance of $430,000, and she’s paying 6.15% interest. She also has $100,000 in her linked offset account.
There are other lenders in the market offering rates of 5.89% and 5.99%. Here’s the breakdown of the interest costs per year, factoring in the offset balance (which Lisa expects to keep in place long-term):
| Lender | Rate | Interest Cost per Year |
|---|---|---|
| Current Lender | 6.15% | $20,340 |
| Option 1 | 5.89% | $19,437 |
| Option 2 | 5.99% | $19,767 |
Potential savings:
Lisa could save between $570 and $900 per year in interest.
But here’s the catch — refinancing comes with upfront costs. You’ve got lender fees, discharge fees, government charges, and sometimes break costs (depending on the loan).
Let’s say it costs Lisa $1,200 to switch. If she saves $600 a year, it takes two years just to break even.
That’s why it’s so important to crunch the numbers properly.
Should you refinance?
- If you’re planning to sell or refinance again soon, switching may not be worth it.
- If you’re planning to hold your property for the long term, a lower rate could save you thousands.
- But if you don’t run the numbers — or you choose a loan that doesn’t suit your needs — it could end up costing more overall.
Thinking about refinancing?
Send me a quick message or book a call — I’ll compare your current loan with hundreds of others to see what your real options are.
