Mortgage refinance calculator

How the saving is worked out

Both loans are run through the standard amortisation formula on your current balance. The current loan uses your rate over the years you have left. The new loan uses the rate you enter, over the same term unless you change it.

The difference between the two repayments is the monthly saving. The difference between the two total interest figures is the lifetime saving, and it is the number that actually matters.

A worked example: $450,000 left at 6.50% with 25 years to run costs about $3,038 a month. The same balance at 5.90% over the same 25 years costs about $2,872. That is $166 a month, roughly $2,000 a year, and close to $50,000 in interest over the remaining term.

The costs of switching, which are not in the number

The panel above deliberately excludes the cost of moving. Here is what you should expect to pay, and it should come off the saving before you decide.

Break costs on a fixed loan are the one that catches people. They are calculated from the movement in wholesale rates since you fixed and they can run into five figures. Ask your lender for a break cost quote in writing before you go any further.

The term trap: why a lower repayment can cost more

If you have 22 years left and you refinance into a new 30-year loan, your monthly repayment drops. Some of that drop is the better rate, and the rest is simply spreading the same debt over eight more years.

Total interest usually goes up, sometimes by more than the rate saving takes off. Tick the reset toggle on the calculator and watch the interest figure move while the monthly figure improves. It is the clearest demonstration of the trade there is.

There is nothing wrong with resetting the term if lower repayments are the actual goal, and for some households they are. It just should be a decision you made, not a side effect you did not notice.

When refinancing is not worth it

If refinancing does not actually save you money, we will say so. These are the situations where it usually does not.

• The rate difference is under about a quarter of a percentage point on an average balance
• You are inside a fixed term and the break cost swallows the saving
• Your balance is small enough that fixed switching costs dominate the sum
• You are planning to sell within a year or two
• Your equity is under 20% and you would pay lenders mortgage insurance again
• Your circumstances have changed and you would not pass the new lender's assessment

That last one is real and it is worth checking before you apply. A declined application leaves a mark on your credit file, and applying without knowing whether the file will pass is an avoidable risk.

What lenders do differently on a refinance

Refinances are the most contested part of the market, and lenders behave differently on them than on new purchases.

Some hold their sharpest pricing for refinances and never advertise it. Some apply a reduced serviceability buffer where you are not increasing the debt, which can make a switch possible that would otherwise fail. Some price by loan-to-value ratio in tight bands, so a valuation that comes in well makes a material difference.

Turnaround times vary from a few days to several weeks, and that matters if you are trying to move before a fixed rate expires. Comparing the panel is how you find the lender whose policy and pricing both suit your file.

Ask your current lender first

Before you switch anything, ring your lender's retention team and ask what they will do to keep you. Existing customers are routinely paying more than new ones at the same institution, and a phone call sometimes closes most of the gap.

Come to that call with a number. Knowing what is available elsewhere is what makes the conversation short, and the calculator above gives you exactly that.

If they match it, you have saved yourself the switching costs and the paperwork. If they do not, you already know what moving is worth, and we can have the application in within a day.