Early repayment penalty: when does refinancing still pay off?

What is an early repayment penalty?

If you want to break your mortgage rate before the end of the fixed-rate period, the bank can charge compensation. The bank works out how much interest it misses out on because you break the contract early, and passes those costs on to you.

When is refinancing worth it despite the penalty?

The key question is not how high the penalty is, but what you save afterwards. If the difference in interest rates is large enough, the savings can more than recoup the penalty and the other costs.

What other costs play a role?

Beyond the penalty, there can be costs for things like advice, the appraisal and the notary. We include those in the calculation, so you are not just looking at the new interest rate.

Financing the penalty into your mortgage

If the income and property value assessments allow it, costs can sometimes be financed into the new mortgage. That does not make them free. The costs become part of the mortgage and have to be repaid like the rest.

Also look at the fixed-rate period

A lower rate is not automatically the best choice. We also look at how long you fix the rate for and what you expect rates to do. The choice has to fit your overall financial situation.

Want to know whether refinancing makes sense despite an early repayment penalty? We calculate the complete picture for you.