Insights
This question sounds simple, but the real answer depends on more than the new interest rate. To work out your true savings, you need to account for fees, how long you plan to keep the loan, and whether you’re giving up features you actually use.
A small rate reduction on a big loan can be meaningful. The same rate reduction on a small loan might not be worth the hassle. That’s why the first step is always to look at your current balance and your current rate.
Refinancing can involve discharge fees, application fees, valuation fees, and sometimes annual package fees. If you are on a fixed rate, break costs can also apply. The right way to think about fees is payback time. How long will it take for the monthly savings to cover the cost of switching.
Work out the difference between your current rate and the proposed new rate. Then apply that difference to your loan balance to estimate the annual saving. Then divide your total switching costs by the annual saving to get a rough payback period. If the payback period is short and you plan to keep the loan for a while, refinancing is more likely to make sense.
Sometimes the lowest headline rate comes with trade offs. If you rely on a true offset account, or you regularly use redraw, you want to make sure the new loan still fits your behaviour. A slightly higher rate with the right features can outperform a lower rate that forces you into a less flexible setup.
It is often not worth it when the rate improvement is small, the fees are high, or you plan to sell soon. It can also be not worth it if you are fixed and break costs are large, unless the savings clearly outweigh them.
Confirm your current rate and balance. Confirm your loan type and whether break costs apply. Estimate your LVR, because under 80 percent can improve options. List the features you rely on, such as offset. Estimate switching costs, then compare savings over a realistic timeframe like 12 to 24 months.
Want to see what the repayments could look like? Use our Loan Repayment Calculator to test different loan amounts, rates, terms and repayment frequencies. It can also show how extra repayments may change the total interest paid over time.
Look at the rate difference, apply it to your loan balance to estimate annual savings, then compare that to the total costs of switching to find payback time.
It can be, especially on larger balances, but you want to confirm fees and the payback period.
Common ones include discharge fees, application fees, valuation fees, and sometimes package fees. Fixed loans may also have break costs.
It can, depending on how you set it up. Sometimes that helps cash flow, but it can increase total interest paid. It’s worth deciding intentionally.
Often yes, but not all loans have a true offset. It’s important to compare like for like when features matter.
We can help you sense check structure, borrowing power, and next steps so you can move forward confidently, without creating a compliance headache later.
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