Switching lenders vs staying and repricing

Get a real comparison: the rate a specialist can obtain for your file at another lender, in writing. Call your lender, ask for the retention or customer loyalty team, state the competing rate and that you are prepared to move. Most banks have discretion to match or approach it. Ask for the decision in writing and check the new rate is applied on the next statement. Repeat annually; the gap reopens over time.

The bank matches or comes close to the market rate, your loan structure suits you, you have an offset you use, and you would incur break costs or clawbacks by leaving. In that case the refinance saves little and costs time. A quarter of a per cent difference on a $500,000 loan is about $100 a month, which is meaningful, but the refinance costs and effort need to be weighed against it.

The bank will not move, or moves only a fraction. You need cash out, consolidation, a structure or a policy the current lender will not offer. You are on a product with fees or restrictions you want gone. A new lender is offering a cashback that more than covers the costs. Or the rate gap is half a per cent or more, where the savings over two or three years dwarf the fees.

Discharge fee at the old lender, mortgage registration and discharge fees to the state, application or settlement fee at the new lender, possibly a valuation fee, and break costs if any part of the loan is fixed. Typically $1,000 to $2,000 excluding break costs. Cashbacks, where offered, are usually conditional on a minimum loan size and staying for a period.