Refinance Break-Even Calculator

Is It Worth Refinancing Your Home Loan?

Usually yes, if two things are true: the monthly saving repays your switching costs quickly, and you plan to keep the loan for longer than the break-even point. That is the whole test. Refinancing is a one-off cost traded for an ongoing saving, so the only question that matters is how fast the saving pays back the cost, then how long you keep collecting after that.

On a $600,000 loan over 25 years, cutting your rate by 0.50% saves roughly $181 a month, so $1,000 of switching costs is recovered in about 6 months. Every month after that is pure saving, which compounds to more than $53,000 over the remaining term if the rate gap holds.

The reverse is also true. If your saving is $30 a month and switching costs $1,000, you wait almost three years to break even, and a lot can change in three years. The calculator above does this arithmetic for your exact numbers, honestly, including telling you when a switch is not worth making.

What Does It Cost to Refinance?

For a typical Sydney refinance with no lenders mortgage insurance involved, total switching costs usually land close to $1,000. The main items:

• Discharge fee from your current lender: typically $150 to $400, charged for closing out the old loan.
• Government fees: roughly $200 to $400 in NSW, covering discharge of the old mortgage and registration of the new one.
• Application, valuation or settlement fees on the new loan: often waived on refinance offers, but can be $150 to $700 if charged, so check before you apply.
• Ongoing fees: not a switching cost, but an annual package fee of $250 to $400 on the new loan quietly erodes your saving every year. Factor it into the rate comparison.

The big exception is LMI. If your loan is above 80% of your property's current value, the new lender may charge lenders mortgage insurance again, even if you paid it on the original loan. That can add thousands and usually destroys the economics of the switch. Check your position with our equity calculator and LMI calculator before going further, or read how to refinance in Sydney for the full process.

Is It Worth Refinancing for 0.25%?

Often, yes, though the case is stronger the bigger your balance. The table below shows the monthly saving from a 0.25% and a 0.50% rate cut, assuming a 6.00% p.a. starting rate, principal and interest, 25 years remaining, and how fast each saving recovers $1,000 of switching costs.

Illustrative only, at an assumed 6.00% p.a. starting rate, principal and interest over 25 years remaining, $1,000 total switching costs, no cashback. Your figures depend on your rate, balance, term, and actual costs. Use the calculator above for your own numbers.

A 0.25% cut on a $500,000 loan takes just over a year to pay for itself, which is still fine if you are staying put, but a 0.25% cut on a $1 million loan breaks even in around 7 months and saves roughly $1,800 a year. And in practice, when I compare a loan that has not been reviewed in a few years against a 50+ lender panel, the gap is often larger than 0.25%.

When Is Refinancing NOT Worth It?

I would rather tell you now than after you have paid the fees. Refinancing is usually the wrong move when:

• You are selling or paying out the loan soon. If you will not hold the loan past the break-even point, the switch costs you money. Selling within a year of a 6-month break-even is fine; selling within 4 months is not.
• Your LVR is above 80%. A new lender may charge lenders mortgage insurance again, which can add thousands of dollars and typically pushes the break-even out by years, not months. Wait until your equity or repayments bring you under 80%, then switch.
• You are on a fixed rate. Breaking a fixed term early can trigger break costs that run into the thousands, depending on how rates have moved since you fixed. Get the exact break cost from your lender in writing before doing anything, and add it to the switching costs in the calculator above.
• The loan is nearly paid off. On a small balance with a few years left, the interest saving from a lower rate is tiny, while the fixed costs of switching are the same. A $100,000 balance saving $20 a month takes over four years to recover $1,000.

If any of these apply, the honest answer may be to stay put, make extra repayments, or simply ask your current lender for a rate review. All three are things I can help you weigh up at no cost.

How This Calculator Works

Both loans are modelled as principal and interest over the same remaining term, using the standard amortisation formula: M = P × r(1+r)^n ÷ ((1+r)^n − 1), where P is your loan balance, r is the monthly interest rate (annual rate divided by 12) and n is the number of monthly repayments remaining.

Your monthly saving is the repayment at your current rate minus the repayment at the new rate. Your net switching cost is your total switching costs minus any cashback, floored at zero. The break-even point is the net cost divided by the monthly saving, rounded up to whole months. The total saving over the remaining term is the monthly saving multiplied by the months remaining, minus the net switching cost.

Three honest limitations. First, the calculator holds both rates constant for the full term; real variable rates move, so treat the long-run total as indicative and the break-even months as the reliable figure. Second, it compares both loans over the same remaining term; extending the term lowers the repayment but adds interest, which is covered in the FAQ below. Third, it ignores differences in ongoing fees and offset benefits between the two loans, which is exactly the kind of detail a comparison rate, and a broker, exists to capture. For a repayment-only view, see the repayment calculator, or the refinance savings calculator for lifetime savings scenarios.

Refinance Break-Even FAQ