Refinancing: compare remaining costs, not just the new repayment
When checking refinancing, weigh the outstanding balance, settlement costs and the old loan's remaining cost against the new loan's total cost.
A lower monthly repayment can come at a high price if it is bought with a longer term. Compare the costs still outstanding on the old loan with all costs of the new loan.
The right basis for comparison
You need the current outstanding balance, the remaining instalments, any early repayment compensation and all costs of the new loan.
- Settlement amount on the cut-off date
- Sum of the remaining payments on the old loan
- New repayment and new term
- One-off settlement or brokerage costs
Separate liquidity from cost
A lower repayment can help in the short term even though the financing becomes more expensive overall. Name this goal consciously before you decide.
In this section
Frequently asked questions
When is refinancing worthwhile?
In numerical terms it pays off when all costs of the new loan, including settlement and incidental costs, are lower than the costs still outstanding on the old loan. The yardstick is therefore the difference in remaining costs, not the size of the new monthly repayment. A longer new term can lower the repayment and still increase the total cost.
What information do I need for refinancing?
You need the current settlement amount of the existing loan, the number and size of the remaining instalments, and any fees or early repayment compensation (Vorfälligkeitsentschädigung). Your current lender states these figures in a settlement statement (Ablösebescheinigung). Only then can a new offer be reliably set against them.
Can I combine several loans into one?
Several running loans can in principle be bundled into one. This makes them easier to manage and can change your monthly burden; what matters, though, is whether the sum of all costs is lower afterwards. If extra money for new purchases is financed on top, it is no longer refinancing but new borrowing.