Refinance Home Loan Calculator

Comparing Loans on the Same Basis

A refinance home loan calculator compares your current loan with a new offer over the time you expect to keep the loan. Use the same starting balance and holding period for both loans. Then separate the effect of the lower rate from the effect of a longer term.

A lower repayment is not the same as a saving. Resetting a 25-year remaining term to a new 30-year loan lowers each repayment because you repay principal more slowly. More of the debt is still owed when the holding period ends.

Incorrect method: count the drop in the monthly repayment as the saving. Correct method: total the interest, ongoing fees and switching costs each option charges over the holding period, less any cashback. Compare those totals. Repaying principal reduces the debt you owe, so the calculator never counts it as a cost.

The comparison table adds a third column for the offer on your current remaining term. Comparing it with the entered term shows how much of the result comes from the rate and fees, and how much from the term. For lender questions and the application steps, read the guide to mortgage refinancing in Australia.

Refinance Break-Even Calculation

The break-even month is the first month in which the refinance's running cost is no higher than the current loan's. When the monthly saving is steady, divide the switching costs by that saving.

In the starting example without cashback, switching costs total $1,250.00. In month 1, the new loan charges $2,454.17 interest against $2,704.17 on the current loan. It also avoids the $32.92 monthly share of the current $395.00 annual fee. That saves $282.92, and $1,250.00 ÷ $282.92 is 4.4 months, so the costs are recovered in month 5.

Savings rarely stay steady for long. Interest falls on both loans as they are repaid, at different speeds when the terms differ. A cashback arrives in a single month, and a break cost changes the total at the switch.

The calculator therefore builds both loans month by month. It keeps a running total of interest and fees for each option and starts the refinance with its switching costs. The break-even month is the first month the refinance total is equal or lower. If that never happens within either loan's term, the result shows Never.

Moneysmart's mortgage switching calculator also estimates how long it takes to recover the cost of switching. Its published assumptions add upfront fees to the new loan balance. This calculator lets you choose between paying the costs at the switch and adding them to the loan.

Fixed-Rate Expiry and Timing

A fixed rate's end date sets the review window for a refinance. Switching before that date can bring a break cost from the current lender, while switching on or after it avoids one. Enter the end date and the break cost the lender quotes.

The calculator includes the break cost only when the switch date falls before the end date. It does not estimate a break cost itself, because only the current lender's quote gives the figure for the actual loan. The results state the month the fixed rate ends.

Suppose the starting loan's fixed rate ends 4 months after the switch date, and the lender quotes a $2,000.00 break cost. Without the cashback, switching now raises the costs to $3,250.00. Break-even moves from month 5 to month 12, and the 60-month saving falls to $11,465.21.

In those first 4 months, the lower rate and fee save $1,124.92 before switching costs. On these entries, the break cost is larger than the savings from switching early. If the offer is still available when the fixed rate ends, move the switch date to the end date to compare without the break cost.

Reading Savings Over Time

In the starting example, the current loan has $500,000.00 owing over 300 months at 6.49%, with $395.00 a year in fees. The offer is 5.89% with no ongoing fee, $1,250.00 in switching costs and a $3,000.00 cashback. Over a holding period of 5 years, the current loan charges $155,124.04 interest and still has $452,749.44 owing at the end.

Resetting the term to 360 months lowers the repayment by $410.43, to $2,962.48. Interest over the holding period is $142,383.83, and $464,635.03 is still owed at the end. The net saving is $16,465.21.

Keeping the remaining 300 months lowers the repayment by only $184.94, to $3,187.97. Interest falls to $140,225.20 and the balance owed to $448,947.00. The net saving rises to $18,623.84.

Total fees are the same in both refinance cases: $1,250.00 of switching costs and $0.00 in ongoing fees, against $1,975.00 of ongoing fees on the current loan. The term reset adds $2,158.63 of interest over the holding period and $110,104.91 over the life of the loan. Kept to the end, the reset loan falls behind the current loan from month 270.

The yearly table shows the running saving at each year-end. An extra repayment amount applies to both loans, so it shortens each one without favouring either.

Cashback and Break-Even Timing

A cashback reduces the refinance's cost only from the month it is paid. Enter the expected payment date, and the calculator adds the cashback at the first monthly point on or after that date.

With the $3,000.00 cashback paid in month 2, the starting example breaks even that same month. Without the cashback, recovery takes until month 5, and the 60-month saving is $13,465.21 instead of $16,465.21.

A cashback paid after the holding period adds nothing to the saving over that period. An early cashback can also put a refinance ahead while higher ongoing fees take the lead back later. The results then show the month it falls behind.

Read the offer's terms for its eligibility conditions and any requirement to repay the cashback before you rely on it. The results show break-even with and without the cashback, so you can judge the switch on its rate and fees alone.