How Much Does Refinancing Actually Save?

Short answer: it depends on three numbers - your loan balance, the gap between your rate and the rate you could move to, and how many years you have left. Below are worked examples so you can see the shape of it, followed by the honest caveats most articles skip.

The worked examples (read the assumptions)

All figures below are illustrations, not offers or current market rates. They assume principal-and-interest repayments, 25 years remaining, the same remaining term after switching, and rates held constant - real loans move around. Your numbers will differ.

Take a $600,000 loan with 25 years remaining, and compare an illustrative starting rate of 6.50% against three lower rates:

• 0.25% lower (6.25%): roughly $93 less per month - around $28,000 less interest over the remaining term
• 0.50% lower (6.00%): roughly $185 less per month - around $55,000 over the term
• 0.75% lower (5.75%): roughly $276 less per month - around $83,000 over the term

Loan size scales the result almost directly. At a 0.50% gap: a $500,000 loan saves roughly $154/month (about $46,000 over the term); a $750,000 loan roughly $231/month (about $69,000).

Want these numbers on your own figures? The refinance savings calculator does exactly this in 30 seconds, including your break-even point on switching costs.

Why the "over the term" number is bigger than you expect

A couple of hundred dollars a month doesn't sound life-changing. But a home loan runs for decades, and a rate gap compounds quietly the whole way. That's why the same 0.50% that feels minor at the kitchen table adds up to a serious five-figure sum over the loan's life - and why lenders rely on borrowers not checking.

The three caveats that keep this honest

• Switching costs eat the first months of savings. Discharge, government and setup fees commonly total $700–$1,200 (fixed-rate break costs can be far more). At $185/month saved, that's roughly 4–7 months to break even - fine if you're staying put, pointless if you're selling soon. I've covered the full cost list here.
• Resetting to a fresh 30-year term flatters the monthly figure. Stretch the remaining debt over more years and repayments fall even with no rate change - but you can pay more interest overall. In my comparisons the term stays the same, so the saving is real, not a repayment illusion.
• The advertised rate isn't the whole loan. Offset accounts, fees, and how a lender treats your circumstances can matter more than a small rate difference. Comparing properly means comparing packages, not headlines.

When the answer is "don't bother"

If your balance is small, your remaining term is short, or the gap to market is thin, the honest maths often says stay put - or just ask your current lender to reprice, which costs nothing and takes one phone call. I tell clients this regularly. Knowing refinancing isn't worth it is just as valuable as discovering it is.

Quick answers

Is a 0.25% rate difference worth refinancing for?

Sometimes. On a larger loan with many years remaining, 0.25% can still mean tens of thousands of dollars over the term - but after switching costs, the case is more marginal than a 0.50%+ gap. It can also often be captured by simply asking your current lender to reprice, which costs nothing. That's usually where I'd start.

Do the savings change if I have less time left on my loan?

Yes, significantly. The total-interest saving shrinks as your remaining term shortens, because there are fewer repayments left for the lower rate to work on. The monthly saving still applies - but with, say, 8 years remaining, the lifetime benefit is far smaller than with 25 years remaining, and switching costs weigh more heavily.

Why does my bank offer new customers a lower rate than mine?

It's often called the loyalty tax: lenders compete hardest for new business, while existing customers drift onto less competitive rates over time. Sometimes just asking your lender to match their new-customer pricing works - and if it doesn't, that gap is exactly what refinancing is for.

Want the saving calculated on your actual loan? Start your obligation-free enquiry → or call Michael on 0477 979 377.

Written by Michael Gross - Principal Mortgage Broker & Founder, Mocha Finance. A former financial planner with 8+ years in finance, Michael compares 40+ lenders for clients across Melbourne. Credit Representative 546597 of LMG Broker Services Pty Ltd (ACL 517192) · FBAA Member.
Reviewed and updated 4 July 2026. Rates, fees, schemes and lender policies change over time - always confirm current details. Examples on this page use clearly labelled illustrative figures, not current market rates.

Michael Gross is a Credit Representative (546597) of LMG Broker Services Pty Ltd (ACN 632 405 504, Australian Credit Licence 517192). The information on this page is general in nature and doesn't take into account your personal objectives, financial situation or needs - consider whether it's appropriate for your circumstances before acting on it.