The useful comparison is not just the old rate versus the new rate. It is the remaining cost of the existing loan versus the total cost of the alternative after processing, legal, valuation, switching and tenure effects are considered.
Start with the current loan
- Outstanding principal today
- Current interest rate and whether it is fixed or floating
- Actual EMI
- Remaining tenure
- Known prepayment or conversion conditions
Then test alternatives
- Monthly or lump-sum prepayment
- Lower-rate refinance or balance transfer
- Same EMI with a shorter tenure
- Lower EMI with a longer tenure
- Upfront switching costs and break-even period
Do not compare EMI alone
A lower EMI can improve monthly cash flow while increasing the total lifetime interest if the tenure becomes much longer. The decision should compare both affordability and total cost.