Australian home-loan decision tool
Mortgage Refinance Break-Even Calculator Australia
See whether a lower rate actually saves money after switching costs, cashback, annual fees and the effect of changing the loan term.
Estimated result
Enter your details to compare the scenarios.
What break-even means
Refinancing has an upfront cost and an ongoing benefit. The break-even month is the point where lower repayments and fees have recovered discharge fees, application costs, break fees, valuation charges and any new lender’s mortgage insurance, after subtracting genuine cashback.
A short break-even period can make a refinance attractive, but it is not enough on its own. The new loan term, features, fixed-rate conditions and total interest can matter more than the first-year repayment.
Why a fresh 30-year term can mislead
Resetting a loan with 20 years remaining to a new 30-year term usually reduces the required monthly repayment. Part of that reduction comes from spreading the debt over another decade, not from the lower rate. The borrower may feel immediate relief while paying interest for longer.
This calculator models each loan until payoff and shows the new payoff time. Compare the new loan using a term close to the existing remaining term first. Then test a longer term separately so the price of the cash-flow relief is visible.
Refinancing costs to enter
- Current lender discharge or termination fee.
- New lender application, settlement, valuation and package fees.
- Break costs on a fixed-rate loan.
- Possible lender’s mortgage insurance where equity is below the lender’s requirement.
- Legal, title, government and broker costs not covered by the lender.
How cashback should be treated
Cashback reduces the switching cost only if it is actually paid, retained and not offset by a higher rate or fees. Do not compare a cashback loan with a non-cashback loan on the bonus alone. Model the full rate, fee and term combination.
Decision process
- Ask the current lender for a rate reduction before paying to leave.
- Request a written payout figure and all switching costs.
- Compare the same remaining term first.
- Test rates at least one percentage point higher than the advertised rate.
- Check whether valued features such as offset, redraw or fixed splits change.
The refinancing calculation in plain English
The calculator amortises the current loan and proposed loan month by month. Each payment is divided between interest and principal, annual fees are added, and any extra repayment is applied consistently. The switching cost combines discharge, application, valuation, break and new LMI costs, then subtracts genuine cashback.
Break-even occurs when the cumulative cash-flow saving from the proposed loan has recovered the net switching cost. Total-interest comparison continues until each loan is repaid, so a lower required repayment caused by a longer term cannot masquerade as a pure saving.
Compare the same remaining term first
If the current mortgage has 22 years remaining, the cleanest first comparison is a proposed 22-year term. A new 30-year term can reduce the monthly payment even when the rate saving is modest because principal is spread across eight extra years. That can improve short-term affordability while increasing lifetime interest.
After the like-for-like comparison, run the longer term as a separate cash-flow strategy. Record both the lower payment and the additional years in debt. A refinance is not necessarily wrong because the term is extended, but the extension should be deliberate and visible.
Switching costs that belong in the model
Enter every cost that exists only because the loan is being changed: current lender discharge fees, fixed-rate break costs, application and settlement charges, valuation fees, legal or title costs, package fees and any new lender’s mortgage insurance. Broker costs should also be included when paid by the borrower.
Annual package fees affect the comparison even when the upfront application fee is waived. Features can have costs too: an offset account attached to a higher rate should be compared with the cheaper basic loan using the expected offset balance.
How to treat cashback
Cashback reduces the net switching cost only if the borrower qualifies, receives it and keeps the loan long enough to satisfy the conditions. It should not be counted twice as both lower costs and extra savings. A large cashback can create an immediate modelled break-even, but the rate and ongoing fees still determine whether the loan remains cheaper over time.
Run the calculation once with cashback and once without it. If the refinance only works because of the bonus, check the clawback terms and compare a non-cashback product with a lower rate.
Worked comparison method
- Request a written payout figure and all current-loan exit costs.
- Use the proposed comparison rate and actual product fees, not only the headline rate.
- Keep the remaining term equal for the first run.
- Test the new rate at least one percentage point higher.
- Run a sale or second-refinance date before the calculated break-even month.
The last test matters because a theoretical lifetime saving is not realised when the borrower exits before recovering the costs. A short break-even period generally reduces this risk, but there is no universal acceptable number.
Features and flexibility need a price
Offset, redraw, split loans, repayment frequency, fixed-rate limits and hardship options can affect the value of a product. The calculator focuses on measurable cash flows. If one loan has materially better features, estimate the dollar value or run the relevant offset scenario rather than declaring the feature “free”.
Also check whether extra repayments are allowed and whether the loan reverts to a different rate after an introductory period. The entered rate should represent the period being modelled.
What the result does not include
The calculator does not assess serviceability, approval probability, tax consequences, fixed-rate break quotes that change daily, or product suitability. It assumes rates remain constant within each scenario. Use the stress test to expose rate risk and obtain current lender documents before making a decision.
Documents to compare before applying
Keep the latest loan statement, current payout quote, proposed credit contract, fee schedule, comparison rate, cashback conditions and any broker disclosure together. Confirm whether the proposed rate is variable, fixed, introductory or conditional on a package. Record the date of every quote because rates and break costs can change before settlement.
After settlement, compare the first new statement with the model. Check the opening balance, fees, repayment amount and offset connection. A refinance that was attractive on quoted figures can underperform when an omitted fee, delayed cashback or different loan term appears in the final account. Keep the approved repayment schedule for later checks.
Official sources and review notes
This calculator is general information. The calculations use the assumptions shown on the page and do not determine legal status, eligibility, tax outcomes, lending approval or financial-product suitability.
- Moneysmart — Switching home loans — Official guidance on fees, LMI, break costs and loan-term risks.
- Moneysmart — Mortgage switching calculator — Government calculator and assumptions for switching loans.
Related calculators and guides
Frequently asked questions
What is a good refinance break-even period?
There is no universal cut-off. A shorter break-even period reduces the risk that you sell or refinance again before recovering the costs.
Does cashback count as a saving?
It reduces the net switching cost if you receive and keep it, but the loan can still be more expensive through its rate, fees or term.
Why does the new loan show lower repayments but higher total interest?
The new term may be longer. Spreading the same balance across more years lowers repayments while keeping the debt outstanding longer.
Does the calculator include fixed-rate break costs?
Yes, as a manual input. Obtain a current quote from the lender because break costs can change.
Should I refinance if the break-even is never reached?
Not for cost savings alone. A refinance may still be chosen for features, flexibility or hardship reasons, but that is a different decision.