Breaking a mortgage early: calculate the full cost

A lower rate does not automatically make an early switch worthwhile. Include the current lender’s written payout amount, any discharge or setup fees, and the new lender’s approval conditions before comparing the expected interest cost.

Separate a maturity switch from an early break

Start with the date. A mortgage coming to the end of its term can be reviewed for renewal or a move to another lender. If you want to switch before the term ends, you may need to break the existing contract and pay a prepayment charge, depending on the mortgage and its terms.

Get the current payout amount in writing

Ask the current lender for a payout statement and an explanation of any prepayment charge. The calculation can vary by lender and contract. A web calculator is an estimate; confirm the amount and how long the quote remains valid with the lender.

List every cost on both sides

Check for discharge, registration, transfer or assignment, appraisal and administration fees. Ask the new lender whether it will cover any of these costs and what conditions apply. If the mortgage has loan insurance, ask whether increasing the loan or extending amortization could affect premiums.

Compare over the same time period

Use the same balance and a clearly defined comparison period. Include expected interest and payments, fees and the remaining balance at the end of that period. If the proposed terms differ, show the differences instead of relying on the headline rate.

Confirm you qualify with the new lender

A new lender will review the application under its own criteria. Switching may not be available on the same terms, and a lower rate cannot replace approval. Confirm the property, income, debt and requested mortgage terms before making a commitment.

Questions to ask before deciding

Ask for the written payout amount and expiry date; the breakdown of charges; all setup costs; the new lender’s approval conditions; and a side-by-side cost comparison over the same period. Also ask whether waiting until maturity or using a blend-and-extend option changes the costs.

General information only. Costs and eligibility depend on the mortgage contract, lender and borrower circumstances. Ask the current and proposed lenders to confirm amounts and conditions in writing. Approval is subject to lender review.