Refinancing costs money up front and saves money each month. This works out how long the saving takes to cover the cost.
That break-even point is the decision. Below it you are worse off; above it you are ahead — so the question is really whether you expect to keep the loan longer than the break-even.
Compares your current loan with a refinance offer over the same remaining term, and shows how long the switching costs take to recover.
Switching costs
Discharge fee on the old loan, application and settlement fees on the new one, and any valuation cost. In Australia this commonly runs to several hundred dollars, and lender cashback offers can make it negative.
Term years
The remaining term, not the original one. Refinancing to a fresh thirty-year term after eight years of repayments is a different comparison — it lowers the repayment by extending the loan, which the total interest will show.
The break-even is in months. Compare it against how long you realistically expect to hold this loan: if you may sell or refinance again inside that window, the switch does not pay for itself.
The monthly saving is the second figure. A large saving with a long break-even means high switching costs; a small saving with a short one means the costs are low and the rate gain is marginal.
Total interest over the remaining term is the third. It is the figure that catches a refinance that lowers the repayment by stretching the loan out.
Every figure below is computed by the same calculator on this page, from the inputs described. Nothing here is typed in by hand, so an example cannot disagree with the tool.
A half-point move on a large balance recovers switching costs quickly. Compare the break-even against how long you expect to keep the loan.
The saving is real but small, and the break-even stretches out. This is where the answer is often to ask your current lender to match rather than to switch.
Both loans are amortised over the same remaining term at their respective rates. The difference in repayment is the monthly saving.
The break-even is the switching cost divided by that saving, in periods — the point at which cumulative savings equal what the switch cost.
The same remaining term on both
This is the honest comparison. Refinancing to a longer term will always show a lower repayment, and comparing that against your current one is not a like-for-like result.
The new rate holds
An introductory rate that reverts after two years is not the rate to enter here unless you intend to refinance again when it does.
Break costs on fixed loans are not modelled
Leaving a fixed-rate loan early can attract a break cost running to thousands of dollars, calculated from wholesale rate movements. Get the actual figure from your lender before relying on any break-even.
Lenders mortgage insurance may recur
If your equity is below 20%, refinancing can mean paying LMI again on the new loan. Check the LVR calculator first.
Compares two home loans on repayment, total interest and total cost, so the difference between them is explicit.
Works out the loan-to-value ratio: how much is borrowed as a percentage of what the property is worth.
Works out the regular repayment on a home loan, and what it adds up to in interest over the full term.
Works out gross equity in a property, and how much could be released while staying within a loan-to-value ratio you choose.
This calculator can be embedded on a business website, branded to match it, with a call to action that sends the enquiry to that business rather than collecting anything here.