How Much Can You Save
by Refinancing?
Real examples, break-even explained, and what determines whether refinancing will save you money.
How much can you save by refinancing? You could save hundreds of dollars per month by refinancing your mortgage if you reduce your interest rate. For example, a 1 percentage point rate reduction on a $500,000 loan could save around $300 to $400 per month, depending on your loan terms.
Real savings example
Refinancing is one of the most straightforward ways to reduce your mortgage costs. The amount you could save depends primarily on three factors: your outstanding loan balance, the difference between your current and new rate, and the remaining term of your loan.
Example
Loan: $600,000 | Current rate: 6.5% | New rate: 5.5%
~$400 per month
That is approximately $4,800 per year in reduced repayments.
Estimate based on a $600,000 principal and interest loan over 25 years. Actual savings depend on your specific loan terms, lender, fees, and individual circumstances. This is not financial advice.
Costs you need to consider
Savings figures alone do not tell the full story. You need to factor in the costs of switching, which typically include:
- Discharge or exit fees from your current lender
- Application or establishment fees from your new lender
- Legal and settlement costs
- Break costs if you are exiting a fixed-rate loan early
- Lenders Mortgage Insurance if your equity is below 20 per cent
These costs reduce your net savings and affect how quickly you break even. For a full breakdown, read our guide on the cost of refinancing a mortgage in Australia.
What is the break-even point when refinancing?
The break-even point is how long it takes for your monthly savings to cover the total upfront cost of switching. It is the most important number to look at when deciding whether refinancing makes financial sense.
Example
Refinancing costs: $2,000 | Monthly savings: $200
Break-even: 10 months
After 10 months, every dollar saved goes directly to you.
Simplified example. Actual break-even depends on your specific costs and savings.
The biggest mistake people make
Many borrowers focus only on the monthly repayment reduction. While lower repayments are valuable, it is equally important to consider the total interest you will pay over the life of the loan, the loan term (are you extending it?), and whether the new loan structure gives you the features and flexibility you need.
A broker can help you see the full picture. Our comprehensive Australian refinancing guide covers everything you need to consider.
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