Refinance Savings Calculator
Compare your current loan to a new rate and see how long it takes to recoup switching costs.
How Mortgage Refinancing Works in Australia
How it works
Refinancing means replacing your current home loan with a new one — either with your existing lender (a "retention" or "repricing" deal) or with a different lender. The main motivation is usually a lower interest rate, but borrowers also refinance to access better features (offset accounts, redraw flexibility), consolidate debt, or release equity for renovations.
The process involves applying for a new loan, which includes a full credit assessment, property valuation, and sometimes a new LMI premium if your LVR has risen above 80%. The new lender pays out your existing loan balance plus any discharge and government fees. In Australia, typical switching costs include a discharge fee ($150–$350 from the old lender), government mortgage registration fees ($150–$200 depending on state), and potentially an application or settlement fee from the new lender (often waived as a competitive incentive).
The critical question is whether the interest savings outweigh the costs of switching — and how long it takes to reach that break-even point. A rate reduction of 0.50% on a $500,000 loan saves roughly $2,500/year in interest, so switching costs of $1,000 are recouped in about 5 months. However, if you're on a fixed rate, breaking the contract early can incur substantial break costs — sometimes $10,000–$30,000+ — which can negate years of savings on the new rate.
When to use this calculator
- You've seen a lower rate advertised and want to calculate whether switching saves you money after accounting for all costs
- You want to find the break-even point — how many months until the interest savings from the new rate exceed the cost of switching
- You're coming off a fixed rate and want to compare your lender's revert rate with external offers
- You're considering refinancing to release equity for renovations, an investment, or debt consolidation
- You want to compare keeping your current loan term (e.g. 22 years remaining) versus resetting to a new 30-year term — which lowers repayments but increases total interest
Key concepts
- Break-even period
- The number of months until cumulative interest savings from the lower rate exceed the total cost of switching. A shorter break-even period means refinancing makes more sense. If you plan to sell or move within the break-even window, the switch may not be worthwhile.
- Switching costs
- Typical refinancing costs in Australia include: discharge fee from your current lender ($150–$350), mortgage registration and deregistration fees ($150–$200 per state), and potentially valuation, settlement, or application fees from the new lender. Many lenders offer cashback incentives ($2,000–$4,000) to offset these costs, though cashback amounts have been declining.
- Fixed-rate break costs
- If you refinance before your fixed term ends, the lender may charge break costs based on the difference between your locked-in rate and the current wholesale rate for the remaining fixed period, applied to your loan balance. These can be substantial — tens of thousands of dollars — especially if wholesale rates have fallen since you fixed.
- Resetting the loan term
- When you refinance, the new lender will typically offer a fresh 25–30 year term. While this lowers monthly repayments, it extends how long you're paying interest. A borrower 8 years into a 30-year loan who refinances to a new 30-year term will pay significantly more total interest. Where possible, match the new term to your remaining term (e.g. 22 years) to maintain your payoff trajectory.
Worked example — refinancing a $480,000 loan from 6.60% to 6.05%
Maria has a $480,000 variable-rate loan at 6.60% with 25 years remaining. She's been offered 6.05% by a new lender. Switching costs include a $350 discharge fee and $170 in government registration fees. The new lender waives the application fee.
| Current loan | New loan (same term) | |
|---|---|---|
| Interest rate | 6.60% | 6.05% |
| Monthly repayment | $3,283 | $3,112 |
| Monthly saving | — | $171 |
| Total interest remaining | $504,905 | $453,615 |
| Total interest saved | — | $51,290 |
| Total switching costs | — | $520 |
| Break-even calculation | |
|---|---|
| Total switching costs | $520 |
| Monthly interest saving | $171 |
| Break-even point | 3 months |
Maria breaks even in just 3 months and saves $51,290 over the remaining life of the loan. If she matches the 25-year remaining term, her repayments drop by $171/month immediately. If instead she reset to a new 30-year term, her repayments would drop further to $2,882/month — but the total interest paid over 30 years would be $557,021, meaning she'd pay $103,000 more than sticking with the 25-year term at the new rate.