Refinance calculator
Whether switching loans is worth it: the monthly saving, how long the costs take to come back, and what the change does to total interest.
Break-even point
8 months
204 a month recovers 1,500 of costs
- Monthly saving
- $204.00
- New repayment
- $3,062.00
- Lifetime interest saved
- $57,134
| Current repayment | $3,266.00 |
|---|---|
| New repayment | $3,062.00 |
| Switching costs | -$1,500.00 |
| Interest remaining, current loan | $460,552 |
| Interest plus costs, new loan | $403,418 |
| Lifetime difference | $57,134 |
- Assumes both loans run to term with no further extra repayments.
Dropping $480,000 from 6.4% to 5.7% over the same 24 years saves about $199 a month and recovers $1,500 of costs in 8 months.
Over the life of it
How this is calculated
Break-even is costs divided by the saving
Switching costs — application, valuation, discharge and settlement — are recovered from the lower payment. At $1,500 of costs against a $199 monthly saving that is 8 months. If you might sell or refinance again sooner, the switch loses money.
break-even months = costs ÷ monthly savingA lower payment is not a lower cost
Resetting a loan with 24 years left back to a fresh 30 years lowers the payment even at the same rate, because the balance is spread over 72 more instalments. That can add tens of thousands in interest while the monthly figure improves.
Compare interest remaining, not interest paid
Interest already paid on the old loan is sunk and irrelevant. The only comparison that matters is interest still to come on each path, which is why this tool amortises the current balance rather than the original amount.
gain = current interest remaining − (new interest + costs)Worked example: $480,000 at 6.4% with 24 years left, refinanced to 5.7%
| Balance | $480,000 |
|---|---|
| Current rate | 6.4% |
| New rate | 5.7% |
| Costs | $1,500 |
| Monthly saving | about $199 |
|---|---|
| Break-even | 8 months |
| Term | Kept at 24 years |
Holding the term at 24 years is what turns the saving into a real one. Stretching back to 30 years would cut the payment by roughly $500 a month and add well over $50,000 of interest.
What this assumes
- Both loans are principal and interest with monthly repayments.
- Rates hold for the full term.
- No extra repayments on either loan.
- Costs are paid up front rather than added to the balance.
Where this commonly goes wrong
- Cashback offers are usually paid once and taxed in some markets, while a rate that reverts after a year costs every year after that.
- Rolling switching costs into the loan hides them from the payment while adding interest on them for the full term.
- A fixed-rate loan broken early can attract a break cost far larger than the switching fees, and it is calculated on the rate movement, not a flat fee.
Questions
When is refinancing worth it?
When the break-even is comfortably shorter than how long you will keep the loan. On $480,000, a 0.7% rate drop saves about $199 a month and recovers $1,500 of costs in 8 months — a clear win if you are staying several years.
How much do I need to save to make it worthwhile?
There is no fixed rule of thumb. Divide the switching costs by the monthly saving: under a year is compelling, two to three years is marginal, and anything beyond how long you intend to hold the loan is a loss.
Does refinancing reset my loan term?
By default, yes — most lenders write a fresh 30-year loan. That lowers the payment and raises total interest. Ask for the remaining term instead, which keeps the full benefit of the lower rate.
What costs are involved in refinancing?
Typically a discharge fee on the old loan, an application or settlement fee on the new one, a valuation, and government registration charges. Together these usually land between $500 and $2,000 outside of break costs on fixed loans.
Should I take the cashback offer?
Only after comparing the ongoing rate. A $3,000 cashback against a rate 0.25% higher on a $480,000 loan is recovered by the lender in under three years, and you keep paying the difference for the remaining term.
Does refinancing hurt my credit?
A new application creates a credit enquiry and briefly lowers the score, typically recovering within months. Applying to several lenders at once compounds the effect, so compare rates before applying rather than by applying.
Related tools
Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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