A lower payment can look attractive without explaining the full cost. Use a consistent comparison before deciding whether to stay or switch.
1. Start with matching assumptions
Write the same mortgage balance and remaining amortization at the top of both offers. Record the term, rate type and payment frequency separately. If one offer changes the repayment period, label that difference rather than calling the payment reduction a saving.
2. Separate certain costs from estimates
Create three columns: confirmed in writing, estimated, and still to ask. Put legal, discharge, appraisal and registration costs in the relevant column. Record any cashback conditions beside the incentive, so a benefit today is not mistaken for an unconditional saving.
3. Compare the life you expect to live
Write down any likely move, parental leave, large payment or renovation during the proposed term. Ask each lender how its contract handles that event. Keep the answers with the offer, along with the expiry date and the person who confirmed them.
Questions to bring to our conversation
- Are both offers based on the same repayment period?
- Which switching costs would I actually pay?
- What changes if I sell before the term ends?
Further reading: FCAC: Mortgage renewal. General information; lender requirements and individual circumstances vary.
Worked example: when does a switching cost pay back?
Suppose two offers use the same balance, amortization and payment schedule. Switching costs $1,500 upfront and reduces the monthly payment by $50. Dividing $1,500 by $50 gives a simple cash-flow break-even of 30 months. After 24 months, the payment difference is only $1,200, less than the switching cost.
This is an illustration, not a rate quote or a full savings calculation. Compare the remaining balance, interest paid, contract features and any exit charges too. A lower payment does not always mean a lower overall cost.