Save money and pay off your mortgage sooner by refinancing
Refinancing your home loan can allow you to switch to a lower interest rate and enjoy lower fees or other loan charges. Reducing your interest rate even by a fraction of a percentage opens you up to thousands in potential savings and can significantly reduce the amount of time it takes to pay off your home loan.
When your interest rate is lower, it means a greater portion of your repayments will go towards paying down the principal loan amount. If you switch to a lower interest rate and start making larger home loan repayments, you'll pay off your mortgage even quicker.
How does this refinance calculator work?
This refinance calculator gives you an estimate of what you can save by refinancing your home loan. The calculator analyses three different scenarios:
- Not switching and repaying the current loan.
- Switching to a new home loan and making minimum loan repayments.
- Switching to a new home loan and making higher loan repayments.
Once you enter your current and new loan details, the calculator will automatically display your results for all three scenarios. For scenarios two and three, you'll see the total saving over the life of the loan if you choose to refinance.
The Switching Save or Cost Chart graphs how much you will save (or lose) by refinancing your mortgage.
How to use this refinance calculator
- Check your most recent mortgage statement to see how much you still owe on your current loan. This would be the "Loan Amount".
- Input the interest rate of your current loan and how long you still need to pay off the mortgage.
- Assuming you will maintain the same repayment frequency as your current loan, input your "Repayment Frequency".
- If your current loan charges you a regular maintenance fee, make sure you include this in the "Regular Fee" box.
- The "End Fee" should include the sum of all fees required to be paid to the existing lender, such as discharge fees, break fees (typically charged for breaking a fixed rate home loan during the fixed term).
Now that you've input the details of your current loan, you can then input the details of the new home loan you're considering switching to:
- If there is an introductory period associated with your new home loan, enter how many years this would be available. If there isn't any, simply enter "0". For fixed-rate home loans, this would be the fixed-period component of the loan.
- This may be a discount to the standard variable rate the lender would normally charge their customers. However, as a new customer, the lender may reduce the standard interest rate. If an introductory rate doesn't exist, simply enter "0". For fixed-rate loans, this would be the locked-in rate during the fixed term period of the home loan.
- The "Standard or Revert Rate" is the ongoing interest rate you will be switching to after the introductory period or the fixed-rate period has ended. This is usually the standard variable rate the lender quotes with the home loan.
- Sum up all the fees required to obtain the new loan. This may include Lenders' Mortgage Insurance (LMI), conveyancing/legal fees, as well as an establishment fee.
- If your new loan is part of a home loan package or offers you additional features such as the ability to make additional repayments, use a redraw or offset account, then you may need to pay an annual fee. Add all these together for the year and divide them by 12 to indicate the monthly "regular fee".
How accurate is this calculator?
This calculator is designed to give you an estimate of what you could save by refinancing your home loan and either making the minimum or higher monthly payments. The calculator works on a series of assumptions, including:
- Upfront or ongoing fees and charges are not taken into account.
- Interest is calculated by compounding the same repayment frequency, which may not be true in practice.
- A year consists of 26 fortnights, 52 weeks, and is counted as 364 days.
- No rounding takes place during calculation, while repayments are rounded to the nearest cent in practice.
- This calculator does not take into account some loan features such as redraw facilities and offset accounts etc.
Because different policies, fees, and charges apply to the home loans offered by lenders, a calculator can't give you a precise answer on how much you'll save by refinancing. With this in mind, you should only use the results from this refinance calculator to indicate what you could save by switching to another mortgage.