def calc_monthly_payment(principal, annual_rate, years):
    r = annual_rate / 12
    n = years * 12
    return principal * (r * (1 + r)**n) / ((1 + r)**n - 1)

principal = 500000
years = 25

rate_current = 0.0569
rate_other = 0.0549

pmt_current = calc_monthly_payment(principal, rate_current, years)
pmt_other = calc_monthly_payment(principal, rate_other, years)

print(f"Current Monthly Payment (5.69%): ${pmt_current:.2f}")
print(f"Other Monthly Payment (5.49%): ${pmt_other:.2f}")

# Calculate remaining balance after 1 year (12 payments)
def remaining_balance(principal, annual_rate, years, months_paid):
    r = annual_rate / 12
    n = years * 12
    pmt = calc_monthly_payment(principal, annual_rate, years)
    bal = principal * ((1 + r)**n - (1 + r)**months_paid) / ((1 + r)**n - 1)
    return bal

# Total interest paid in year 1 and principal paid
# Let's simulate month by month to get exact interest paid in year 1
def simulate_year_one(principal, annual_rate, years):
    r = annual_rate / 12
    pmt = calc_monthly_payment(principal, annual_rate, years)
    bal = principal
    total_interest = 0
    total_principal = 0
    for _ in range(12):
        interest = bal * r
        principal_part = pmt - interest
        total_interest += interest
        total_principal += principal_part
        bal -= principal_part
    return total_interest, total_principal, bal

int_curr, prin_curr, bal_curr = simulate_year_one(principal, rate_current, years)
int_other, prin_other, bal_other = simulate_year_one(principal, rate_other, years)

print("\n--- Year 1 Breakdown ---")
print(f"Current (5.69%): Interest = ${int_curr:.2f}, Principal = ${prin_curr:.2f}, End Bal = ${bal_curr:.2f}")
print(f"Other (5.49%): Interest = ${int_other:.2f}, Principal = ${prin_other:.2f}, End Bal = ${bal_other:.2f}")

interest_savings = int_curr - int_other
print(f"Interest saved in Year 1: ${interest_savings:.2f}")

# Cash back and costs
cash_back = 3000
moving_cost = 1400
net_cash_effect = cash_back - moving_cost
print(f"Net upfront cash effect (Cash back - Moving cost): ${net_cash_effect:.2f}")

total_benefit_year1 = interest_savings + net_cash_effect
print(f"Total net financial benefit in Year 1: ${total_benefit_year1:.2f}")

Current Monthly Payment (5.69%): $3127.43
Other Monthly Payment (5.49%): $3067.45

--- Year 1 Breakdown ---
Current (5.69%): Interest = $28209.44, Principal = $9319.70, End Bal = $490680.30
Other (5.49%): Interest = $27210.86, Principal = $9598.56, End Bal = $490401.44
Interest saved in Year 1: $998.58
Net upfront cash effect (Cash back - Moving cost): $1600.00
Total net financial benefit in Year 1: $2598.58

# Let's verify the net cash flow if leaving at the end of Year 1
interest_saved_y1 = 998.58
cash_back = 3000
moving_cost = 1400
clawback = 3000

net_if_leave_y1 = interest_saved_y1 - moving_cost + cash_back - clawback
print(f"Net financial result if leaving after Year 1 (with full clawback): ${net_if_leave_y1:.2f}")

Net financial result if leaving after Year 1 (with full clawback): $-401.42

Switching lenders can feel like a no-brainer when you see a lower interest rate and a cash-back offer, but the 1-year fixed term combined with the 3-year cash-back clawback changes the math entirely.

Here is a detailed breakdown of the numbers, the hidden risks, and whether the move makes financial sense for your $500,000 mortgage.

1. The Financial Breakdown (Year 1)

• Current Offer (5.69% fixed for 1 year):
  • Monthly payment: $3,127.43
  • Total interest paid in Year 1: $28,209.44
• New Lender Offer (5.49% fixed for 1 year + $3,000 cash back):
  • Monthly payment: $3,067.45 (saving $59.98 per month)
  • Total interest paid in Year 1: $27,210.86
  • Interest saved in Year 1: $998.58

Net Upfront Impact:

• Cash back received: +$3,000.00
• Less moving/discharge/legal costs: -$1,400.00
• Plus Year 1 interest savings: +$998.58
• Total Net Gain in Year 1: $2,598.58

2. The Catch: The 3-Year Clawback Rule

Both offers are fixed for 1 year. At the end of 12 months, your fixed term expires, and you will need to refix your mortgage.

Because the new lender requires you to stay for 3 years to keep the $3,000 cash back, a major risk emerges:

• If you leave after 1 year: If interest rates drop further next year and another bank offers a significantly better rate, you will likely want to switch. However, doing so will trigger the full $3,000 clawback repayment.
• The Result of Leaving at Year 1:
  $$\text{Interest Saved ($999)} - \text{Moving Costs ($1,400)} + \text{Cash Back ($3,000)} - \text{Clawback Repayment ($3,000)} = \mathbf{-$401.42}$$
  • Bottom line: If you leave after one year, you end up $401 worse off than if you had stayed with your current bank.

3. Is Switching Worth It?

• It IS worth it if: You are confident that you will stay with this new lender for at least 2 to 3 years, or if you plan to refix with them when the 1-year term ends without jumping ship to another competitor. Over 3 years, the lower rate and cash back compound into a genuine savings win.
• It IS NOT worth it if: You plan to aggressively shop around for the absolute lowest rate every 12 months. The clawback and moving costs will wipe out your savings.

Action Plan

1. Leverage the offer with your current bank: Call your current bank manager, tell them you have a written offer for 5.49% plus a $3,000 cash contribution from a competitor, and ask if they will match the rate or offer a loyalty cash contribution to keep your $500,000 mortgage.
2. Calculate your exact moving costs: Ensure your solicitor's discharge fee and the new lender's setup fees do not exceed the estimated $1,400.
3. Assess your 3-year outlook: Decide whether you are comfortable being locked into this new lender's ecosystem for three years to protect the cash incentive.