Penalties

For home loans, banks usually set a minimum or ‘lock in’ period for you to repay your loan. This lock in period is mainly to make sure the bank gets a minimum interest from your loan. If you refinance your loan during the lock in period, you’ll be charged a penalty based on the bank loan amount. So don’t forget to check what the penalty is with your bank before deciding whether or not to refinance your home!

Other costs

Refinancing is actually taking a new loan. Whenever you take a new home loan, you’ll have to pay for things like legal fees, bank processing fees, stamp duty, property valuation fees, and a new Mortgage Reducing Term Assurance or a Mortgage Level Term Assurance. These costs can accumulate to a lot and if you’ve almost finished paying your loan, it may not be worth it to refinance your loan.

So, before you decide on anything, make sure you compare the interest amount you’ll be saving to all the other costs you’ll have to pay for refinancing! If the interest savings are less than the refinancing costs, then it might not be a good idea to refinance your loan.