Refinance home loan rates and the break-even maths
Refinancing is worth doing when the saving clears the cost of moving within a period you are comfortable with. That is the whole test. Everything else is detail.
The costs of switching
- Discharge fee from your current lender.
- Application, settlement and valuation fees at the new lender, some of which are often waived.
- Government registration fees for the change of mortgage.
- Break costs if you are leaving a fixed rate before the term ends. These can be significant.
- Lenders mortgage insurance again if your new loan is above 80 per cent of the property value. LMI is generally not transferable between lenders.
The break-even calculation
Add every cost of switching. Work out your monthly saving at the new rate on your current balance and remaining term. Divide the total cost by the monthly saving. That gives you the number of months to break even. If you expect to hold the loan comfortably beyond that point, refinancing is likely worth it.
When refinancing is not the right move
- The gap is small and the costs would take years to recover.
- You are close to selling the property.
- Fixed-rate break costs outweigh the benefit.
- Your loan-to-value ratio is above 80 per cent and refinancing would trigger a fresh LMI premium.
- Your circumstances have changed in a way that would make approval difficult right now.
Refinancing is also a structure decision
A refinance is the natural moment to review how the loan is structured, not just the rate: offset arrangements, splits, repayment type and term. Getting the structure right can matter more over time than a small rate difference.
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This page provides general information only and does not take your objectives, financial situation or needs into account. It is not credit assistance, a credit quote, or an offer of finance. Any rate you are offered depends on a full assessment by a lender. RateSearch is operated by Mango Financial Group, an authorised credit representative (CRN 530027) of Finsure Finance and Insurance Pty Ltd, Australian Credit Licence 384704.