Purpose: Know whether a refinance offer really saves you money before you sign, and avoid the most common trap: a lower monthly payment that costs more in total.
A bank offers you a lower rate. Your monthly payment would drop by €300. It sounds like an easy yes. Sometimes it is. Sometimes the same offer quietly costs you thousands, because the lower payment comes from stretching the loan, not from the lower rate.
This post walks through one example from every angle. All the numbers come from our free Refinance Calculator, so you can repeat them with your own loan.
The example
- You borrowed €300,000 at 6% over 30 years, five years ago.
- Today you owe about €279,000, with 25 years left, and pay €1,799 a month.
- A bank offers 5%. Switching costs 2% of the balance (early-repayment and arrangement fees) plus €1,500 (notary, valuation): €7,083 in total.
Paid to the end, your current loan still costs €539,595. That is the number every offer has to beat.
Trap 1: the clock starts again
The offer comes with a new 30-year term, so the payment drops to €1,499, a €300 cut. But you had 25 years left. Now you have 30.
| Stay | Refinance, 30 years | |
|---|---|---|
| Monthly payment | €1,799 | €1,499 |
| Time to repay | 25 years | 30 years |
| Total still to pay | €539,595 | €546,582 |
Refinancing costs €6,987 more. The lower rate saves real money, but five extra years of interest and the fees eat all of it.
Same offer, your current end date: take the 5% loan over 25 years instead. The payment is €1,632 (still €167 lower) and the total is €496,671: a saving of €42,924.
Rule: compare the total, not the monthly payment. To judge the rate itself, keep your current end date.
Trap 2: fees can outweigh a small rate cut
With the same fees and 25 years, an offer at 5.8% saves only €3,109, and you only get ahead after 13 years and 7 months. Sell or repay before that and the fees cost you more than the rate saved.
That's why the calculator shows a break-even rate: the rate at which the offer, fees included, costs exactly the same as staying. In this example it is 5.86% at your current end date. An offer above it loses money; an offer just below it barely helps.
Use the nominal rate. Enter the interest rate itself, not the APR (THM in Hungary, DAE in Romania). The APR already includes fees, so adding the fees again would count them twice.
Trap 3: a low rate that doesn't last
Many offers are fixed only for a few years. Say the new loan is 4.5% fixed for 5 years, then follows a variable rate that turns out to be 7%:
- Years 1–5: €1,552 a month, lower than today.
- From year 6: €1,902 a month, higher than your current €1,799.
- In total it costs €16,961 more than staying.
Nobody knows the rate five years from now. Try a few: the rate after the fixed period ends, plus one or two points above it. If a plausible rise turns the offer into a loss, you are betting on rates, not saving money.
Don't forget the monthly extras
Banks often attach conditions to a better rate: life or home insurance through them, a current account with a monthly fee, a minimum salary transfer. In the calculator they go under More options as monthly costs.
If the 5%, 25-year offer requires a €30-a-month package, the saving drops from €42,924 to €33,924. That is €30 × 300 months. Still worth it here, but a small rate cut plus a pricey package can easily become a loss.
The best version: keep paying what you pay now
Back to the 30-year offer, the one that cost €6,987 more. Take it, but keep paying €1,799 a month, your current payment. Everything above the required €1,499 goes to principal:
- The loan is repaid in 20 years 11 months, 4 years 1 month earlier than staying.
- The total is €457,146: €82,450 less than staying.
You also keep a safety net: in a bad month you can drop back to the required €1,499. In the calculator, open More options and enter your current payment as the total monthly payment, not just the extra on top.
Two checks before relying on this:
- Prepayment fees. Some banks charge a fee for paying extra. Check your contract.
- Buffer first. Extra payments are hard to get back. Build an emergency fund before you put spare cash into the mortgage.
When the timing matters
If you plan to sell the home or repay the loan in a few years, total cost over the full term is the wrong question. What matters is whether you're ahead when you leave.
The calculator shows this as a window. In the example, the 25-year offer moves ahead after 2 years 7 months, once the lower interest has paid back the €7,083 in fees. Sell before that and staying would have been cheaper.
Quick checklist ✅
- Get your balance, rate and remaining term from your latest statement.
- Compare offers at your current end date first, then try other terms.
- Add every fee, and any monthly costs the bank attaches to the offer.
- Use the nominal rate, not the APR / THM / DAE.
- Check the break-even rate. An offer near it isn't worth the paperwork.
- If the rate is fixed only for a while, test a higher rate afterwards.
- If you take a longer term, consider paying your current amount anyway.
This post is general guidance, not financial advice. Banks set their own term and age limits and fees, so check the offer's details with the bank or an independent adviser before you sign.