Mortgage Refinancing Calculator Reveals Vastly Different Fees

A mortgage refinancing calculator has highlighted significant discrepancies in early repayment fees, with potential differences of tens of thousands of shekels for the same loan amount and interest rate.

For a 900,000 shekel loan at 5.5% interest with 22 years remaining, refinancing to a new rate of 4.2% could incur an early repayment fee of 97,927 shekels if the entire loan is on a fixed rate. However, if half the loan is on a variable Prime rate, the fee drops to 45,128 shekels, a difference of over 52,000 shekels. This fee is calculated based on the difference between the existing loan's interest rate and the average market rate published by the Bank of Israel, meaning fees increase when refinancing appears most beneficial.

Loans on the Prime rate track are largely exempt from these fees, while fixed-rate loans bear the full calculation. The calculator also showed that extending a loan's term can negate savings. For instance, refinancing a 900,000 shekel loan from 20 to 25 years at 4.2% resulted in a lower monthly payment but ultimately increased the total cost by 63,563 shekels over the loan's life due to the extended repayment period.

Further scenarios demonstrated that a 1.5% interest rate difference could yield over 78,000 shekels in net savings, while a 0.5% difference yielded only 6,910 shekels, both with identical early repayment fees. Similarly, a 40% discount on the early repayment fee for a 1.2 million shekel loan resulted in net savings of 98,203 shekels, compared to 44,629 shekels with a 10% discount on the fee. The calculator's simulations underscore the importance of considering loan structure, remaining term, and negotiated fee discounts when refinancing.