A lower rate does not tell the whole story

Put the term beside the rate

A smaller repayment may come from spreading the balance over more years. Compare a proposed loan over the remaining term of the current loan as well as the offered term. This makes the cost of extending the loan easier to see.

Add up the cost of changing

Discharge, establishment, valuation and legal costs can affect the result. Fixed rate break costs or lenders mortgage insurance may also be relevant. Ask for a written explanation of the costs that apply to the actual situation.

Compare features with the way you use them

An offset account, redraw facility or package benefit may be useful, but fees and conditions differ. Consider what you will actually use and how access to funds works.

Check the full comparison

A simple payback estimate divides switching costs by estimated regular savings. It is only a starting point: interest changes, balances, fees and loan terms can change the outcome. An appropriately authorised credit professional can assess specific options.

Compare like with like

Start a comparison with the same outstanding balance and remaining loan term. Then consider any proposed change to the term separately. A lower monthly repayment can reflect a longer repayment period as well as a lower rate. Those are different changes with different effects on total interest.

Include discharge, application and ongoing fees where applicable, and ask whether any other costs apply to your circumstances. Consider how long you expect to keep the loan and whether you will actually use its features. An offset account may be valuable when money regularly stays in it, but an attractive feature list does not answer the cost question on its own. Ask for a written comparison that makes the assumptions visible.