Say you owe $500,000 with 25 years left, currently at 6.4 percent, and a new lender offers 5.7 percent with $800 of switching costs. The calculator works out the repayment on each rate over the same balance and term. The current rate gives about $3,345 a month, the new rate about $3,130, a monthly saving of roughly $214. Because the saving is so much larger than the $800 of costs, you recover those costs in under 4 months. Held for the full 25 years, the lower rate saves about $63,525 after the switching costs are deducted. The longer you keep the loan after refinancing, the more that saving compounds in your favour.
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How it is calculated
The tool compares two repayments on the same loan balance and remaining term, one at your current rate and one at the new rate, using the standard amortising formula. The difference between them is your monthly saving. To judge whether switching is worthwhile, it divides the switching costs by that monthly saving to find the break-even point in months. The saving over the remaining term is the monthly saving multiplied by the months left, with the switching costs subtracted once. Note this keeps the term fixed, so it isolates the rate effect rather than the effect of extending or shortening the loan. In practice, weigh any fixed-rate break cost and watch for lender cashback offers, which can shift the break-even point further in your favour.
Frequently asked questions
Is refinancing worth it?
Compare the monthly saving against switching costs (discharge fee, new application or settlement fees, and any fixed-rate break cost). If you break even within a year or two and plan to keep the loan, refinancing usually pays. Also weigh cashback offers some lenders provide.
What are typical switching costs for an Australian home loan?
Expect a discharge fee of $150 to $400 charged by your current lender, plus a settlement fee of $100 to $300 from the new lender. If you are breaking a fixed-rate loan early, a break cost can run into thousands of dollars depending on how far rates have moved since you fixed. Some lenders offer cashback deals of $2,000 to $4,000 that can offset these costs.
Does refinancing affect my credit score in Australia?
Each new home loan application creates a hard enquiry on your credit file, which can reduce your score slightly in the short term. Multiple applications within a short period can signal credit stress to lenders. Spacing applications out and using a mortgage broker who checks your eligibility before applying helps minimise the impact.
How often can I refinance my home loan?
There is no legal limit on how often you can refinance in Australia, but lenders assess serviceability each time. Refinancing too frequently can raise red flags on your credit file and may not be worth it once you factor in repeated switching costs. Most borrowers reassess their rate every two to three years or whenever rates move by more than 0.5 percentage points.