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Switching your home loan: does a lower rate beat the switching costs?

Banks advertise bond switching as easy money: a lower rate, a smaller repayment, sometimes a cash sweetener. The catch they leave out is the cost of switching, which runs into tens of thousands. Whether you come out ahead depends on the rate gap and how long you stay.

Updated 15 June 2026 · THL Property Group

A bond switch moves your outstanding home loan from your current bank to a new one offering a better rate. The lower rate is real. So is the cost of getting there, and that cost is what decides whether the switch is worth making.

Here is the rule worth carrying: a switch only pays if the rate drop is meaningful and you are staying for years. A 0.25% saving almost never justifies the costs. A 0.75% drop or more, on a large balance, usually does. The deciding number is the break-even month, the point where the monthly saving has repaid the once-off costs.

What a switch actually costs

Three once-off costs, all on you:

• Bond registration. The new bank's attorney registers a fresh bond over your property, on the same fee scale as a purchase. On an R1.8m balance that is around R43,000.
• Cancellation attorney. Your old bond is cancelled at the Deeds Office, roughly R6,000.
• Penalty interest. The National Credit Act lets a bank charge up to three months' interest for early settlement, usually waived if you give 90 days written notice first. Give notice and this is zero. Skip it and on an R1.8m bond at 11% it runs over R40,000.

With notice given, budget around R49,000 to switch an R1.8m bond. Without notice, far more.

A worked example

Take an R1,800,000 balance with 20 years left at 11.25%, offered 10.5% over a fresh 20 years, with 90 days notice given so no penalty.

The lower rate drops the repayment from R18,887 to R17,971, a saving of R916 a month. The switch costs about R49,020. That breaks even after 54 months, four and a half years, and saves R170,765 over the remaining term.

Now halve the rate gap. A drop of just 0.25%, from 10.75% to 10.5%, saves only R303 a month. The same R49,020 in costs then takes 162 months, more than thirteen years, to break even, and the lifetime saving shrinks to R23,768. Same costs, a quarter of the rate move, and the deal goes from clearly worth it to barely worth it.

When it pays

• The rate gap is real. Aim for at least half a percentage point, ideally more.
• The balance is large. The saving scales with the balance while the costs barely move, so a big bond clears the costs faster.
• You are staying past the break-even. If you might sell or settle within a few years, the costs may never come back.
• You give 90 days notice. It is the cheapest part of the whole exercise and it removes the largest variable cost.

Run your own balance and the rate you are quoted through the Switch & Save calculator. It nets the saving against the real costs and shows your break-even month, the figure the switch adverts never put next to the lower rate. For the rate your bond tracks in the first place, see what a 1% repo move does to your bond.

Money Cat is an information tool, not financial advice. Switching costs and penalty rules vary by lender; confirm yours, and your quoted rate, before you switch.