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Refinance Calculator
Refinance Calculator
Monthly Payment Savings
$353.67
Refinance Analysis
Refinancing from 7.1% to 5.9% drops your payment by $353.67/month. You recover the $6,500 in closing costs after 1 yr 6 mo. If you expect to keep the home (or the loan) longer than that, the refi nets about $58,239.88 over the loan's life after costs — a genuine win. Note that stretching the term lowers the payment but pays interest on a slower amortization schedule — the lifetime figure reflects that trade.
*Estimates principal-and-interest savings using standard amortisation math. Does not include discharge fees, government registration costs, break costs on fixed portions, LMI re-triggering or offset arrangements. Refinancing costs are paid out of pocket (not capitalised). Educational only, not lending or credit advice.
When a Lower Rate Is Actually Worth It
Refinancing replaces your existing home loan with a new one, usually at a lower interest rate, and it is the single largest recurring-cost lever an Australian mortgage holder can pull. With the RBA cash rate moving in cycles and lenders fighting for established borrowers with cashback offers and discounted package rates, millions of households sit above the 'new customer' rates their own bank advertises — and loyalty is rarely rewarded with a better deal. But the question is never simply 'is the new rate lower?', and chasing a percentage point without doing the maths is how borrowers spend thousands to save hundreds. The real decision has three parts. First, the repayment change: a lower rate or a longer term reduces the minimum repayment, while shortening the term may raise it. Second, the break-even point: refinancing costs money — discharge fees, registration of the new mortgage, possible application and valuation fees, and break costs if any portion is fixed — and those costs are only recovered if you stay in the loan long enough for the monthly savings to repay them. Third, the lifetime interest: a lower rate paired with a fresh 30-year term can actually increase total interest paid over the life of the loan even while the repayment falls, because you have restarted the amortisation clock. This calculator runs all three so you can tell a genuine saving from a refinancing trap.
Amortisation, Break-Even, and the Lifetime Ledger
Both loans are priced with the standard amortisation formula — the fixed monthly repayment that retires a given balance at a given rate over a given term: repayment = balance × monthly rate ÷ (1 − (1 + monthly rate)^(−months)). The tool computes this for your current loan at its remaining term and for the proposed loan at its new rate and term, then reports the difference as monthly savings (or cost). The break-even point is switching costs divided by the monthly saving — the number of months until accumulated savings repay the refinance's upfront price. It is the most important number in the decision: if you expect to sell, move, or switch again before reaching it, the deal is a net loss regardless of how good the rate looks. Finally, the tool compares total payments remaining on each path — interest on your current trajectory versus interest on the new loan — and nets the switching costs out of the difference. This lifetime ledger catches the classic trap: a 1% rate cut paired with a full 30-year reset can lower the repayment while adding tens of thousands of dollars of interest, because you have restarted amortisation on a slower payoff schedule. Australian loans typically track slightly above the RBA cash rate for variable products; the comparison-rate regime also means advertised rates must include most fees, which makes like-for-like quotes easier than it once was.
Expert Insights
Rule of Thumb: Half a Point, Two Years
The Australian guideline is that a refinance is worth pricing when you can beat your current rate by roughly 0.50 percentage points and will stay put past the break-even. That rule survives because typical switching costs — a few hundred in discharge and registration fees plus any application charge — are modest compared with US closing costs. But it is a filter, not a verdict: fixed-rate break costs can wipe out the maths entirely, and a loan with a slightly higher headline rate but a big cashback can win on day one. Run the actual break-even every time — the rule tells you when to look, and the calculator tells you what you found.
Ask Your Own Bank First — Then Make Them Compete
The cheapest refinance is often an internal 'rate retention' offer: ring your current lender, mention you are leaving, and ask for the discount they give new customers. Retention teams routinely shave 0.40–0.80 points without any switching friction, no discharge fee and no new application. If they will not move far enough, get two or three itemised quotes from competitors — including non-bank lenders — and take them back. Borrowers who never negotiate pay the loyalty penalty indefinitely; the difference compounds every month for the life of the loan.
Watch Fixed Break Costs and LMI Re-Triggers
Two Australian-specific traps can flip the numbers. First, breaking a fixed-rate term early can attract economic-cost break charges that run into five figures when rates have fallen since you fixed — always request a written break-cost quote before committing. Second, refinancing resets the lending assessment: if your LVR has crept above 80% because values fell or debts rose, you can be charged Lenders Mortgage Insurance again on a property you already own. Check both before you celebrate the headline rate.
Actionable Tips
- 1
Get Three Comparison-Rate Quotes
Australian lenders must disclose a legally mandated comparison rate that folds most fees into a single annualised percentage — use it to compare offers like-for-like rather than the headline rate alone. Collect at least three quotes (your bank's retention offer included), line them up against the same balance and term, and negotiate. Even 0.25% changes the break-even materially on a six-figure loan, and the first quote is rarely the best one available.
- 2
Decide Your Time Horizon Before You Decide the Refi
Break-even only means something relative to how long you will keep the loan. Selling in three years? A refinance that breaks even in four is a loss. In your forever home? Paying modest switching costs to lock a materially lower rate is usually the stronger lifetime play. Write down your honest expected stay before running numbers — it is the variable that most often flips the answer, and the one no lender will ask you about.
- 3
Keep the Term Honest — Or Shorten It
When refinancing, match the new term to what remains on your current loan unless you deliberately want a smaller compulsory repayment. Resetting to 30 years quietly adds years of interest; keeping the remaining term converts the rate saving into genuine lifetime interest reduction. If cash flow allows, shortening the term does that faster still — compare it against simply making extra repayments on your existing loan, which achieves much the same result while preserving flexibility.
Real-World Examples
Priya Broke Even in Nine Months — and Stayed
Priya held a $620,000 balance at 6.7% with 28 years left. Her lender's retention team would only trim to 6.4%, but a non-bank lender offered 5.7%. Discharge, registration and application costs totalled about $2,800, and the repayment fell by roughly $430 a month — break-even inside nine months. With no plans to sell, she switched, recovered the costs within the year, and the lower rate netted her well over $60,000 across the loan's life after fees.
Dan Chased Rates Twice and Paid Twice
Dan refinanced twice in three years — once for a 0.3% improvement, again for another 0.25% — paying application fees and discharge costs both times, and resetting his term to 30 years on each switch. Each deal looked like a saving in isolation. But his loan balance barely moved while the clock restarted, and the second round of fees took over two years to recover. His broker's advice afterwards: refinance is a transaction with costs, not a habit — price it properly or don't do it.
The Kellys Kept the Term and Won Twice
The Kellys owed $450,000 with 22 years left at 6.4%. Their new lender offered 5.6%, and rather than taking the default 30-year reset they asked for a 22-year term. The repayment dropped by about $160 a month anyway, and total remaining interest fell by more than $55,000 net of the $1,600 in switching costs. By refusing the longer term they got the cash-flow relief and the lifetime saving — the combination most borrowers leave on the table by signing whatever term is pre-filled on the application.
Glossary of Terms
- Break-Even Point
- The number of months it takes for accumulated repayment savings to repay the upfront costs of refinancing. Stay in the loan past this point and the refinance is net positive; exit before it and you wear a loss.
- Comparison Rate
- A legally required single percentage that combines a loan's interest rate with most of its fees, allowing Australian borrowers to compare the true cost of different loans on equal terms.
- Discharge Fee
- The charge a lender applies to release its mortgage over your property when you switch loans, typically a few hundred dollars, plus a separate state government registration fee for the new mortgage.
Frequently Asked Questions
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.