Refinance savings calculator
Compare refinancing interest, fees and cost recovery over the time you expect to keep your loan.
By Ratey · General information for Australian borrowers.
Refinancing saves money when the interest and fee savings exceed the cost of switching over the period you keep the new loan. Start with your existing balance and remaining term, then enter the proposed rate and actual fees. Compare both the costs and the balance still owing. A smaller repayment shows a change in cash flow; it does not, by itself, establish a saving.
Example: the same 25-year remaining term
Assume a $500,000 balance, a current rate of 6.40%, a proposed rate of 5.90%, $2,400 paid upfront to switch, no cashback and no ongoing fees. These are illustrative rates, not current offers. Over 36 months, the monthly model gives repayments of about $3,345 and $3,191.
Interest is about $93,577 if you stay and $86,099 if you switch. After the $2,400 setup cost, the estimated benefit is $5,078. The new balance is also about $1,940 lower. Cumulative interest savings cover the setup cost in month 12. The $154 repayment reduction alone does not describe the whole result.
Start with a comparison you can act on
Use the balance from your latest statement and the years remaining on the current loan. Enter the interest rate offered for your circumstances, rather than a comparison rate or an advertised rate you have not qualified for. Set the holding period to when you realistically expect to sell, repay or review the loan again.
Keep the remaining term the same for the first calculation. Moneysmart recommends checking the new term when switching. Then try a longer term separately if reducing the required repayment is part of your decision. This makes the effect of the rate change easier to distinguish from the effect of stretching the debt.
Read the result in three parts
The repayment difference helps with your monthly budget. Interest and fees measure the borrowing cost. The ending balance shows how much debt remains when your chosen period finishes. Read these together: money that repays principal improves your position even though it leaves your bank account.
Cost recovery occurs when cumulative interest and ongoing-fee savings cover switching costs after the entered cashback. Dividing setup fees by the repayment reduction can give a different answer because some of that repayment difference comes from principal. A result showing no recovery within the holding period is a useful reason to revisit the offer.
| Result | Question it answers |
|---|---|
| Monthly repayment difference | How does the required payment change? |
| Interest and fees over the period | Which option costs less to borrow? |
| Balance at the end | How much debt would I still owe? |
| Cost-recovery month | When do the modelled savings cover the net setup cost? |
Enter costs once, using written quotes
Collect the outgoing lender payout and discharge costs, new-loan setup charges and any settlement costs. If a fixed period remains, request a break-cost quote. Check whether LMI is required for the proposed refinance. Record a confirmed waiver as zero and an unknown charge as an unresolved item, rather than treating both as free.
This calculator treats switching fees as an upfront payment and cashback as an upfront credit. It does not add fees to the new loan balance. If your offer finances fees, request a schedule using that larger balance; the result here will not represent that arrangement. A cashback paid later also requires enough cash to cover settlement in the meantime.
What this monthly estimate leaves out
The model uses monthly principal-and-interest repayments, an annual rate divided by twelve, and constant rates throughout each scenario. It spreads entered annual ongoing fees across the year. Actual lenders may calculate daily interest, collect fees on particular dates and round differently.
Offsets, redraw transactions, extra repayments, changing rates, interest-only periods and tax effects are outside this comparison. If those affect your decision, ask for a tailored schedule. Run a second scenario with a smaller rate advantage or a shorter holding period to see how dependent the result is on your assumptions.
Your next-step checklist
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Common questions
Is the result a lender quote?
No. It is a scenario based on your inputs and the stated monthly method. A lender must confirm the rate, fees, eligibility and repayment schedule.
Why can a lower repayment still cost more?
A longer term spreads principal across more payments. The loan can remain larger for longer, adding interest even when its rate is lower.
What if cashback exceeds the upfront fees?
The model begins with a net credit. Check the full holding-period result: higher interest or ongoing fees can later outweigh that starting benefit.
Sources and assumptions
These primary sources support the explanations above. Examples use invented figures to show the calculation or decision; they are not available loan offers. Check your lender’s terms for your circumstances.
Calculations are estimates and do not establish borrowing eligibility. Read the calculation methodology.
Prepare the next step
Use the switching checklist to turn your comparison into questions for the lender.