See how much you could save by refinancing your loan to a lower rate.
Loan Details
$5k$2M
3%15%
1 year30 years
New Loan Terms
2%12%
1 year30 years
$0$5,000
Monthly Savings
+$0
No change
Savings Summary
Annual Savings+$0
Total Interest Saved$0
Refinancing Costs-$500
Net Savings (After Costs)+$0
Side-by-Side Comparison
Current Loan
Monthly Payment$0.00
Total Interest$0
New Loan
Monthly Payment$0.00
Total Interest$0
Consider Carefully
Based on these numbers, refinancing may not save you money after costs. Check for other benefits like flexible features or offset accounts.
Important Note
This calculator doesn't include potential break fees from your current lender or ongoing fees. Always check your loan contract and compare total costs before refinancing.
Understanding Loan Refinancing in Australia
Refinancing means replacing your current loan with a new loan, typically at a lower interest rate or with better features. In Australia's competitive lending market, banks and lenders constantly offer lower rates to attract new customers while existing customers often remain on higher "loyalty tax" rates. Refinancing lets you access these better deals and potentially save thousands per year.
The main reason Australians refinance is to secure a lower interest rate. Even a 0.5% rate reduction can save significant money over a 25-30 year loan term. For a $500,000 loan, dropping from 7% to 6.5% saves approximately $650 per month, or $7,800 per year. Over 25 years, that's nearly $200,000 in interest savings. Other common reasons include accessing equity for renovations, consolidating debts, switching from interest-only to principal-and-interest, or accessing features like offset accounts.
Refinancing costs typically range from $500-$2,500 for straightforward switches (discharge fees, application fees, valuation, settlement). Some lenders offer cashback incentives ($2,000-$4,000) or waive fees to attract refinancers, which can offset costs. The key metric is break-even period - how many months of savings are needed to recover refinancing costs. If you save $500/month and costs are $1,500, you break even in 3 months. If you plan to keep the property for years beyond this, refinancing makes financial sense.
Be aware of break fees on fixed rate loans. If you're locked into a fixed rate and market rates have fallen, your lender may charge substantial break fees (sometimes $10,000-$30,000+) to exit early. These fees are calculated based on the rate differential and remaining fixed term. Always request a break fee estimate before refinancing a fixed loan. Variable rate loans rarely have exit fees beyond standard discharge fees ($150-$400). Many borrowers refinance when their fixed period ends to avoid this issue.
Frequently Asked Questions
When should I consider refinancing my loan?
Consider refinancing when you can secure an interest rate at least 0.5-1% lower than your current rate, as this typically generates enough savings to outweigh refinancing costs. Other good times to refinance: when your fixed rate period ends (to avoid reverting to higher variable rates), when your property value has increased significantly (reducing your LVR and qualifying you for better rates), when your financial situation has improved (higher income, better credit score), or when you want to access equity for renovations or debt consolidation. Refinancing also makes sense if your current lender has poor customer service, limited features (no offset, no extra repayments), or if you want to switch from interest-only to principal-and-interest. Always calculate total savings minus costs before switching.
What are the typical costs of refinancing a home loan?
Typical refinancing costs in Australia include: discharge fee from your current lender ($150-$400), application fee for the new loan ($0-$600, often waived in competitive periods), valuation fee ($200-$600), settlement fees ($200-$500), legal/conveyancing fees if using a solicitor ($800-$1,500), and potentially lenders mortgage insurance (LMI) if you're borrowing over 80% LVR and didn't pay LMI originally ($2,000-$20,000+ depending on loan size). Total costs typically range from $500-$2,500 for straightforward refinances, or $3,000-$8,000+ if LMI is required. Some lenders offer cashback deals ($2,000-$4,000) or cover some costs to attract refinancers. Always factor in ALL costs when calculating net savings.
What are break fees and when do they apply?
Break fees (also called early exit fees, break costs, or economic cost) apply when you exit a fixed rate loan before the fixed period ends. Lenders charge break fees because they've locked in funding costs for your fixed term based on wholesale interest rate expectations. If market rates have fallen since you fixed, the lender loses money when you exit early, and they pass this cost to you. Break fees can range from zero (if rates have risen) to tens of thousands of dollars (if rates have fallen significantly). The formula considers: remaining fixed term, loan amount, difference between your rate and current wholesale rates, and lender wholesale funding costs. Break fees don't apply to variable rate loans. Always request a break fee estimate from your lender before refinancing a fixed loan.
How much can I save by refinancing to a lower rate?
Savings depend on your loan amount, rate difference, and remaining term. As a rule of thumb, each 1% reduction in interest rate saves approximately $250-$300 per month per $100,000 borrowed. For example, refinancing a $500,000 loan from 7% to 6% (1% saving) saves roughly $1,250-$1,500 per month, or $15,000-$18,000 per year. Over 25 years, this could save $200,000+ in total interest. Smaller rate reductions still add up: dropping from 6.5% to 6.0% on a $400,000 loan saves approximately $580/month or $7,000/year. However, you must deduct refinancing costs from these savings. Use the calculator above to see exact savings for your situation, including break-even period.
Will refinancing affect my credit score?
Yes, refinancing can temporarily lower your credit score by 5-20 points, but the impact is usually minor and short-lived. Each loan application triggers a hard credit inquiry, which stays on your credit file for 5 years (though only impacts your score for 12 months). Multiple applications within 14 days for the same purpose (rate shopping) are typically counted as a single inquiry. Your score may also dip slightly when you close your old loan account, as this reduces your average account age. However, successfully refinancing and maintaining consistent repayments on the new loan will improve your score over time. The temporary score reduction shouldn't deter you from refinancing if the savings are substantial. To minimize impact, avoid applying with multiple lenders simultaneously - work with a broker who can pre-qualify you.
What is loan-to-value ratio (LVR) and why does it matter when refinancing?
Loan-to-value ratio (LVR) is your loan amount divided by property value, expressed as a percentage. If you owe $400,000 on a property worth $600,000, your LVR is 67% ($400k / $600k). LVR determines: available interest rates (lower LVR = better rates), whether you need lenders mortgage insurance (LMI usually required above 80% LVR), and loan approval chances. When refinancing, your LVR has likely improved if you've paid down principal or if property values have risen. For example, you may have borrowed at 90% LVR 5 years ago, but are now at 70% LVR, qualifying you for significantly better rates. Some borrowers refinance specifically to remove LMI by getting below 80% LVR. Always get an up-to-date property valuation before refinancing to understand your current LVR.
Should I refinance from fixed to variable or vice versa?
The fixed versus variable decision depends on your risk tolerance, rate outlook, and financial goals. Fixed rates provide certainty - your repayment won't change for 1-5 years, making budgeting easier and protecting against rate rises. However, you typically can't make large extra repayments (limited to $10k-$30k/year) and can't access offset accounts or redraws. Variable rates offer flexibility - unlimited extra repayments, offset accounts, redraw facilities - but rates can rise at any time. In 2026, with rates potentially peaking, some borrowers are choosing variable to benefit from future rate cuts. Others prefer fixed for certainty. A split loan (e.g., 50% fixed, 50% variable) provides both certainty and flexibility. Consider your employment stability, whether you plan to sell soon, and whether you value flexibility over certainty.
Can I refinance if I have bad credit or missed payments?
Yes, you can still refinance with bad credit or previous missed payments, but your options are more limited and rates will be higher. Most major banks require a clean credit history with no defaults in the past 5 years and no missed payments in the past 12-24 months. However, non-bank lenders and specialist "near-prime" lenders consider applications from borrowers with credit issues. They assess: how recent the credit issues were (older is better), whether issues are resolved (defaults paid, bankruptcies discharged), current employment stability, equity in the property (lower LVR is better, ideally under 70-80%), and your reason for missed payments (medical emergency, job loss, etc. are viewed more favorably than poor money management). Expect to pay 1-3% higher interest rates than standard borrowers. A mortgage broker specializing in bad credit can help find suitable lenders.
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