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Refinance Savings Calculator

Compare your current home loan with a lower rate over the years you actually have left — the monthly saving, how long the switching costs take to pay back, and what you keep over the life of the loan.

Your loan now

$
%
yrs

The new loan

%
$

Monthly saving

$188.07

$3,187.97 a month instead of $3,376.04

Saved over the loan

$55,420

Interest saved over 25 years, after costs

Costs paid back in

6 months

$1,000 of costs, recovered from the monthly saving

Rate difference

0.61%

6.5% down to 5.89%

Worth more if you keep paying the same

Keep paying your current $3,376.04 on the new loan and the $188.07 difference goes straight off the balance. That saves $116,797 and 2 years 10 months, against $55,420 by lowering the repayment.

How the number is built

Monthly saving and the break-even point
Current repayment at 6.5%$3,376.04
−New repayment at 5.89%, same 25 years$3,187.97
=Monthly saving$188.07
Saving over the remaining term, net of switching costs
Interest over 25 years at 6.5%$512,811
−Interest over 25 years at 5.89%$456,391
−Switching costs$1,000
=Saved by lowering the repayment$55,420

General information only. It compares principal-and-interest loans at rates that stay the same for the years remaining, and it takes the switching costs you enter as the whole cost. It does not check whether a new lender would approve you, include ongoing account fees, or allow for lenders mortgage insurance, which can apply again when you refinance above 80% of the property’s value. It is not a quote, credit assistance or a recommendation. Our Credit Guide sets out who we are and how we are licensed.

When refinancing is worth it

The test is simple: does the saving recover the cost of switching well within the time you expect to keep the loan? Moving a $500,000 loan with 25 years left from 6.5% to 5.89% saves $188.07 a month. If switching costs $1,000, that is paid back inside six months, and over the remaining 25 years the lower rate saves about $55,400 after the costs.

Break-even is the number to look at first. A switch that takes three years to pay back is a poor one if you might sell or refinance again in two; a switch that pays back in six months is almost always worth doing.

Keep the term, or the comparison is not fair

A new loan is normally written over 30 years, and a longer term lowers the repayment all by itself. That makes refinancing look better than it is. Refinancing the same $500,000 at 5.89% over a fresh 30 years brings the repayment down to $2,962.48 — but the loan then costs about $566,500 in interest, more than the $512,800 it would have cost to stay on 6.5% for the 25 years that were left.

This calculator always compares the new loan over the same years you have remaining, so the saving it shows is the rate, not the term. If you do take a longer term for the flexibility, keep paying the old repayment and you get the rate saving without the extra interest.

Keep paying the same, and save twice as much

Once the new loan is in place, the cheapest thing you can do is ignore the lower repayment. Keep paying $3,376.04 a month on the 5.89% loan and the $188.07 difference goes straight off the principal every month. On this example that saves about $116,800 after costs — more than twice the $55,400 from taking the lower repayment — and the loan clears 2 years and 10 months early. Choose “Keep paying the same” above to see it on your own figures.

What switching actually costs

  • A discharge fee from your current lender for closing the loan — usually a few hundred dollars.
  • Government fees to discharge the old mortgage and register the new one on the title, set by each state.
  • Application, settlement or valuation fees on the new loan, which many lenders waive for refinancers.
  • Break costs if any part of the loan is on a fixed rate. They depend on how rates have moved since you fixed and can be large; ask your lender for a figure before deciding.
  • Lenders mortgage insurance if the new loan is more than 80% of the property’s value. LMI is not transferable, so refinancing above 80% can mean paying it again — often enough to wipe out the saving.

Ask your lender first

Lenders price new customers more keenly than existing ones, and regulators have found the gap more than once. Before you switch, ask your current lender for the rate it is offering new customers on the same loan. Many will reduce your rate rather than lose you, which saves the switching costs entirely.

If they will not, a broker can compare the market for you, check which lenders will approve the loan on your current income, and manage the discharge and settlement. That is a large part of what our mortgage broking team does, and our borrowing power calculator is a quick check that a new lender would still lend you the balance.

Frequently asked questions

How much could I save by refinancing?

It depends on the rate difference, the balance and how long you have left. Moving a $500,000 loan with 25 years remaining from 6.5% to 5.89% lowers the repayment from $3,376.04 to $3,187.97 a month — $188.07 — and saves about $55,400 over the 25 years after $1,000 of switching costs. Keep paying the old repayment on the new rate instead and the saving grows to about $116,800, with the loan clearing 2 years and 10 months early.

What does it cost to refinance?

Usually a discharge fee from your current lender, government fees to discharge the old mortgage and register the new one, and sometimes an application or valuation fee on the new loan, which lenders often waive. Together these commonly come to somewhere between a few hundred dollars and about $1,500. The big costs are the ones that do not always apply: break costs if any of your loan is fixed, and lenders mortgage insurance if you borrow more than 80% of the property's value.

When is refinancing not worth it?

When the costs take longer to recover than you will keep the loan. That happens with small balances, short times remaining, large break costs on a fixed loan, or when refinancing would trigger lenders mortgage insurance again. It is also not worth it if the saving comes only from stretching the loan back out to 30 years, which lowers the repayment but increases the total interest.

Does refinancing affect my credit score?

Applying for a new loan puts an enquiry on your credit file, which can nudge your score down a little for a while. One application for a refinance is not a problem; several applications with different lenders in a short space of time can be. A broker can compare lenders and narrow it down before any application is made.

Should I take a new 30-year term when I refinance?

Only with your eyes open. Refinancing $500,000 at 5.89% over a fresh 30 years gives a repayment of $2,962.48, well below the $3,376.04 on a 25-year loan at 6.5% — but it costs about $566,500 in interest, more than the roughly $512,800 you would pay by staying where you are. Keep the new loan to the years you had left, or at least keep paying the old repayment, and the lower rate works for you instead of against you.

Is a cashback worth switching for?

A cashback is worth counting, because it pays for the switching costs — a $2,000 cashback against $1,000 of costs means the switch pays for itself on day one. But it is a one-off. A lender offering a cashback with a higher rate can easily cost more within a couple of years, so compare the rate first and treat the cashback as a bonus.

Want us to run these numbers properly?

A calculator works with the handful of figures it asks for. A strategy session works with your income, your debts, your tax position and what you are actually trying to build. The first one is free.

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