Refinance: how it works
Checked 15 Oct 2026. Approach checked against Moneysmart's mortgage switching calculator; government fees from NSW Land Registry Services 2026-27.
Enter your loan as it is now and the new rate you've been offered. The calculator works out both monthly repayments, the interest on each loan over its full term, and your net saving once switching costs (less any cashback) come off. Interest is charged monthly and both rates are assumed to stay the same.
Break-even is the first month from which you stay ahead for good. It counts the cash you save on repayments plus how much less you owe on the new loan, so stretching the loan over a longer term can't look like a saving just because repayments are lower. If the new term is longer, the calculator says so.
Switching costs: the discharge fee default of $350 is an estimate (several big banks charge this; some charge less or nothing). Government fees default to NSW's 2026-27 fees from NSW Land Registry Services: $182.73 to register the discharge and $182.73 for the new mortgage. Other states charge different amounts. If you're on a fixed rate, ask about break costs too. Tick the box to add the costs to the new loan, as Moneysmart's mortgage switching calculator assumes.
Pay it off sooner: if you keep paying your current repayment on the cheaper loan, the extra goes off the balance. The calculator shows how much sooner the loan is paid off and the interest that saves.
General information only, not financial, tax or credit advice. Check your situation with the ATO, your state revenue office or a licensed adviser.
Refinance FAQs
How much will I save by refinancing?
About $54,792 after costs on a $500,000 loan with 25 years left, moving from 6.5% to 5.9% with $715 in switching costs. Repayments drop from $3,376.04 to $3,191.01 a month, a $185.02 saving, and interest falls by $55,507. Even a 0.25% cut (6.5% to 6.25%) saves $77.69 a month and $22,591 overall.
How long does it take to break even on refinancing?
3 months in the example above ($715 of costs, 6.5% to 5.9% on $500,000). With a smaller cut from 6.5% to 6.25%, it takes 7 months. If you add the costs to the new loan instead of paying them up front, you still break even in 3 months, but the net saving falls to $54,137 because you pay interest on the costs.
Should I keep my repayments the same after refinancing?
Yes, if you can afford it. In the example, keeping up the old $3,376.04 a month on the 5.9% loan pays it off 2 years 10 months sooner (22 years 2 months instead of 25 years) and saves $116,191 in interest, more than double what you save by just taking the lower repayment.
Is a longer loan term a good idea when refinancing?
Usually not, if your aim is to save money. Refinancing the same $500,000 at 5.9% over a fresh 30 years cuts repayments by $410.35 a month to $2,965.68, but you pay $54,835 more interest and end up $55,550 worse off after costs. The calculator says when a lower repayment comes from stretching the loan.
What does it cost to switch home loans?
Usually a discharge fee from your current lender (many big banks charge $350), any application, settlement or valuation fees from the new lender, and government fees to register the discharge and the new mortgage. In NSW for 2026-27 these are $182.73 each. Fixed-rate loans can also have break costs, and lender cashback offers can cover some or all of it.