If your financial situation means you need to refinance to get lower monthly repayments by stretching out the repayment period over a greater number of years, you could end up paying more interest in total.
For example, if you have a loan with $350,000 remaining to be paid over 16 years, with a comparison rate of 4% p.a., your monthly repayment will be $2,471 and you will pay a total of $124,429 in interest charges, according to the Mortgage Calculator at moneysmart.gov.au.
If you decide to refinance your loan at the same 4% p.a. rate but for 20 years, you will reduce your monthly repayments to $2,121, but you'll end up paying a total of $159,023 in interest over the longer 20-year period. Even if you refinanced at a lower rate, say 3.8% (reducing monthly repayments to $2,084), you'd still pay more in interest ($150,215) over 20 years.
