How Much of a Rate Difference Genuinely Makes Refinancing Worth the Effort?
On a $600,000 loan, a 0.4% rate reduction saves approximately $2,400 per year in interest. Switching costs are typically recovered in 3–6 months. The question isn’t whether the saving is real — it’s whether you’ll be in the loan long enough to capture it.
It depends on your loan balance and remaining term — but as a practical starting point, a difference of 0.3% or more on a loan above $400,000 is worth running the numbers on. At 0.5% or more, many borrowers find refinancing worthwhile.
Running the Numbers
The break-even calculation: total switching costs divided by monthly interest saving = months to break even. If break-even is under 12 months and you plan to hold the loan for several years, the refinance typically pays off.
At Different Loan Balances
The following examples are illustrative only and will vary depending on the loan, interest rate and fees involved.
- $300,000 loan, 0.4% saving: approximately $1,200/year — switching costs recovered in roughly 3–4 months
- $500,000 loan, 0.4% saving: approximately $2,000/year — typically under 3 months to break even
- $800,000 loan, 0.3% saving: approximately $2,400/year — switching costs recovered quickly
A Factor Some Borrowers May Not Be Aware Of
Your current lender’s pricing for existing customers often differs from new customer rates by 0.2–0.5%. Calling your lender and asking them to match a competitor quote is a legitimate first step before formal refinancing — and it sometimes works without switching at all.
You may wish to speak with a licensed mortgage broker to assess your personal circumstances.
This is general information only. Refinancing decisions depend on individual loan size, features, and circumstances. Speak with a licensed mortgage broker before taking any action. All loans are subject to lender approval.
Sources: ASIC MoneySmart, Comparison Rates and Fees 2025; RBA, Housing Finance Statistics 2025; MFAA Industry Intelligence Service Report 2025.
