Switching costs
What does it cost to move?
Discharge fees from the outgoing lender, government registration fees, and often an application or valuation fee at the new one. Break costs if you are fixed.
CALCULATOR
Would refinancing actually save you money?
The rate is the easy part. The costs of moving are what decide it.
RUN THE NUMBERS
Work out whether switching is worth it
The monthly saving is the easy figure. What decides a refinance is how long that saving takes to cover the cost of moving, and whether it survives holding the loan term constant.
Check a recent statement rather than the rate you were given at settlement.
The term of the new loan
Resetting the term lowers the repayment and raises the total interest. Both figures are shown either way.
The cost of switching
Discharge fee, the new lender's application and settlement fees, and the registration fees on the mortgage.
A cashback offsets the cost once. The rate is what you live with afterwards.
Monthly saving
$265.87
less each month
The switching costs are recovered after 3 months.
- Repayment now
- $4,314per month
- Repayment after
- $4,048per month
- Break-even
- 3 monthsto recover switching costs
- Interest saved, same term
- $75,670net of switching costs
- Interest left on the current loan
- $622,492
- Interest on the new rate, same term
- $545,922
- Switching costs, net of cashback
- $900
- Net benefit over the term
- $75,670
- Stay put$622,492
- Switch, same term$545,922
What this calculation assumes
- Both rates are assumed to hold for the whole term. In practice a variable rate moves and a fixed rate reverts, which is where discount offers are usually won or lost.
- Switching costs are taken as you enter them. A discharge fee, the new lender's fees and the registration fees on the new mortgage all apply, and a fixed loan may carry a break cost on top.
- Break costs are not calculated. They depend on wholesale rates at the time and only your current lender can quote them.
- Lenders mortgage insurance is not included, and it is not usually transferable between lenders — refinancing above 80 per cent of the property value can mean paying it again.
- A cashback is treated as a one-off reduction in switching costs, which is what it is.
WHAT IT TELLS YOU
A refinancing calculation compares two loans, including the cost of switching
The naive version compares your current rate to a new one and reports the difference. That overstates the benefit, because moving is not free and because a new thirty-year term resets the clock on a loan you may be ten years into.
A useful calculation totals the switching costs, works out the monthly saving, and produces a break-even point — the number of months before you are actually ahead.
If you plan to sell or move within that break-even window, refinancing does not pay, regardless of how much better the new rate looks.
WHAT MOVES THE NUMBER
What decides it
The remaining term
Are you resetting the clock?
Refinancing a loan with twenty years left onto a fresh thirty-year term lowers repayments and can increase total interest. Compare like for like.
The break-even point
How long until you are ahead?
Total costs divided by the monthly saving. If you might move house before that point arrives, the exercise is not worth doing.
READING THE RESULT
An estimate is a starting point, not an answer
What the calculation covers
- The monthly repayment difference — between your current loan and a proposed one.
- Total switching costs — where the calculation lets you enter them.
- A break-even estimate — in months, which is the figure that actually matters.
What a lender does differently
- Break costs are lender-calculated — on fixed loans, and cannot be estimated reliably in advance.
- Your borrowing capacity is reassessed — and may have changed since the original loan.
- Valuations can come in low — which affects both LVR and pricing.
- Cashback offers have conditions — and are not a substitute for a competitive rate.
COMMON QUESTIONS
Questions about this calculation
What is a realistic break-even period?
It depends on the size of the saving and the costs involved. Where the rate difference is meaningful and there are no break costs, it is often a matter of months.
Where costs are high or the saving is small, it can stretch far enough that refinancing is not worth doing.
Should I take a cashback offer?
Treat it as one component, not the decision. A cashback attached to an uncompetitive rate is usually worth less than a better rate with no cashback, once you look past the first year.
Check the conditions too — they commonly require a minimum loan size and a period before you can move again.
Will refinancing extend my loan term?
It will if you accept a new thirty-year term by default, and that is the most common mistake. Lower repayments can conceal more total interest.
You can usually request a term matching what remains on your existing loan. Ask for it explicitly.
How do I find out my break costs?
Only your current lender can calculate them, and the figure changes with market rates and the time remaining on the fixed period.
Request a break cost quote before making any decision — the number occasionally settles the question on its own.
OTHER CALCULATORS
Other numbers worth running
GET IN TOUCH
Want the estimate checked against real lender policy?
Would rather talk it through?
(02) 9659 1694Important information
This page explains a calculation. Any figures you produce from it are estimates based on the assumptions described, not a quote, an offer of credit, or an indication that finance will be approved.
The information on this page is general in nature. It has been prepared without taking your objectives, financial situation or needs into account, so it is not personal advice and you should consider whether it is appropriate for you before acting on it.
Any rates, figures or examples shown are indicative only. Lending is subject to approval, and lender eligibility criteria, terms, conditions, fees and charges apply. Talk to us about what your own circumstances allow.