Is Refinancing
Worth It?
Real examples showing when refinancing pays off and when it does not.
Is refinancing worth it in Australia? Refinancing is worth it if the savings from a lower interest rate or better loan structure outweigh the costs of switching. It may not be worth it if break fees are high or if you will not stay in the loan long enough to recover the upfront costs.
When refinancing is worth it
Refinancing can save you thousands of dollars over the life of your loan — but only if the numbers add up. The decision comes down to a simple comparison: will your savings exceed the costs?
Example: worth it
Loan: $500,000 | Rate reduction: 1% | Costs: $2,000
Savings: ~$350/month
Break-even in approximately 6 months. If you plan to keep the loan beyond that, refinancing may be worthwhile in this scenario.
Estimate based on a $500,000 P&I loan over 25 years, 6.5% to 5.5%. Not financial advice.
When refinancing is not worth it
Not every refinance makes sense. Here is an example where the numbers do not stack up:
Example: may not be worth it
Loan: $300,000 | Rate reduction: 0.3% | Costs: $3,000
Estimated monthly savings: ~$55. Break-even: approximately 55 months — nearly five years. Unless you are certain you will hold this loan for that long, the costs may outweigh the benefits.
Estimate only. Actual figures depend on your specific loan terms.
Key factors that determine whether refinancing is worth it
- Rate difference — the larger the gap between your current rate and the new rate, the greater the potential savings
- Loan balance — a larger loan balance amplifies the impact of any rate reduction
- Refinancing costs — discharge fees, application fees, break costs (for fixed loans), and potential LMI all reduce your net savings
- Time in the new loan — the longer you plan to stay in the new loan, the more value you will get from refinancing
The best way to determine whether refinancing is worth it in your situation is to calculate your break-even point. Read more in our comprehensive refinancing guide, which includes a free savings calculator.
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