Before committing to refinancing, the first thing you want to know is: how much will I actually save? The answer depends on your current rate, the new rate available to you, your loan balance, and your remaining loan term.
This guide provides savings tables and a step-by-step calculation method so you can estimate your personal saving before speaking to a broker.
The Core Savings Formula
The monthly interest saving from a rate reduction is calculated as:
Monthly saving = (Current Rate – New Rate) × Loan Balance ÷ 12
For example: ($650,000 loan, rate drop from 6.80% to 5.79%) Monthly saving = (0.068 – 0.0579) × $650,000 ÷ 12 = $547
Annual saving = $547 × 12 = $6,564
Annual Savings Tables by Loan Size and Rate Reduction
$400,000 Loan Balance
| Rate Reduction | Annual Saving | Monthly Saving |
|---|---|---|
| 0.25% | $1,000 | $83 |
| 0.50% | $2,000 | $167 |
| 0.75% | $3,000 | $250 |
| 1.00% | $4,000 | $333 |
| 1.25% | $5,000 | $417 |
| 1.50% | $6,000 | $500 |
$600,000 Loan Balance
| Rate Reduction | Annual Saving | Monthly Saving |
|---|---|---|
| 0.25% | $1,500 | $125 |
| 0.50% | $3,000 | $250 |
| 0.75% | $4,500 | $375 |
| 1.00% | $6,000 | $500 |
| 1.25% | $7,500 | $625 |
| 1.50% | $9,000 | $750 |
$800,000 Loan Balance
| Rate Reduction | Annual Saving | Monthly Saving |
|---|---|---|
| 0.25% | $2,000 | $167 |
| 0.50% | $4,000 | $333 |
| 0.75% | $6,000 | $500 |
| 1.00% | $8,000 | $667 |
| 1.25% | $10,000 | $833 |
| 1.50% | $12,000 | $1,000 |
$1,000,000 Loan Balance
| Rate Reduction | Annual Saving | Monthly Saving |
|---|---|---|
| 0.25% | $2,500 | $208 |
| 0.50% | $5,000 | $417 |
| 0.75% | $7,500 | $625 |
| 1.00% | $10,000 | $833 |
| 1.25% | $12,500 | $1,042 |
| 1.50% | $15,000 | $1,250 |
Net Saving After Switching Costs
Your gross saving needs to be weighed against the cost of switching. Typical refinancing costs:
| Cost Item | Typical Amount |
|---|---|
| Discharge fee (current lender) | $150–$500 |
| New loan application fee | $0–$600 |
| Government registration fee | $150–$200 |
| Property valuation | $0–$600 (often waived) |
| Settlement fee | $200–$400 |
| Total switching cost | $500–$2,300 |
Note: Many competitive non-bank lenders waive application and valuation fees to attract refinancing customers. Your real-world cost may be at the lower end.
Payback period = Total switching cost ÷ Monthly saving
If switching costs $1,500 and monthly saving is $500: payback = 3 months. After month 3, every subsequent month is pure saving.
Long-Term Saving: 3, 5 and 10 Years
These tables show the net saving after switching costs of $1,500 (mid-range estimate):
$600,000 Loan, 1.00% Rate Reduction ($6,000/year gross)
| Timeframe | Gross Saving | After Costs |
|---|---|---|
| 1 year | $6,000 | $4,500 |
| 3 years | $18,000 | $16,500 |
| 5 years | $30,000 | $28,500 |
| 10 years | $60,000 | $58,500 |
$800,000 Loan, 1.00% Rate Reduction ($8,000/year gross)
| Timeframe | Gross Saving | After Costs |
|---|---|---|
| 1 year | $8,000 | $6,500 |
| 3 years | $24,000 | $22,500 |
| 5 years | $40,000 | $38,500 |
| 10 years | $80,000 | $78,500 |
The long-term saving numbers are compelling. Most Australian homeowners with 10+ years remaining on their loan will save tens of thousands by refinancing to a better rate.
What Rate Reduction Should You Expect?
In June 2026, the gap between major bank standard variable rates and the best available non-bank rates is approximately:
| Borrower Profile | Expected Rate Reduction |
|---|---|
| Good credit, LVR <70%, PAYG | 0.70%–1.20% |
| Good credit, LVR 70%–80%, PAYG | 0.60%–1.00% |
| Self-employed, LVR <80% | 0.50%–0.90% |
| Previous refinance (non-bank) | 0.20%–0.50% |
If you haven't reviewed your rate in 2+ years, a 0.80%–1.00% reduction is very realistic.
The "Stay or Go" Calculation: A Decision Framework
Use this framework to decide whether to refinance:
Step 1: Find your current rate (check your loan statement or app).
Step 2: Get a comparison rate from NIK Finance (takes 2 minutes. We compare 130+ lenders).
Step 3: Calculate rate difference.
Step 4: Find your loan balance.
Step 5: Annual saving = Rate difference × Loan balance.
Step 6: Estimated switching cost: $500–$2,000.
Step 7: Payback period = Switching cost ÷ Monthly saving.
Decision rule: If payback period < 12 months AND you plan to keep the property for 3+ years, refinance.
Frequently Asked Questions
Does the savings calculation change if I have an offset account? Your effective interest rate is lower if you maintain significant offset funds. The saving calculation should use your effective rate (actual interest paid ÷ average outstanding balance) rather than the nominal rate. If you hold $50,000 in offset against a $600,000 loan, your effective rate is your nominal rate applied to $550,000. Switch to a new loan with a better rate AND offset, and maintain the same offset balance.
What if I'm comparing a fixed rate to a variable rate? Fixed and variable loans have different risk/benefit profiles beyond just the rate. The savings calculation is identical for comparison purposes, but you should factor in the flexibility/inflexibility of fixed rates.
How does extra repayments affect the saving? If you maintain extra repayments after refinancing, the saving is compounded. You're paying more off the principal, which reduces your interest bill even further.
Will rates change after I refinance? Possibly. If rates fall further, variable loans will fall with them. Fixed rates lock in your saving. Neither is definitively better. It depends on rate movements you can't predict with certainty.
I have 8 years left on my loan, should I still refinance? Yes, if there's a meaningful rate saving. 8 years at $550,000 and 1.00% saving = $44,000 gross saving less switching costs. Absolutely worth it.
Get Your Personalised Savings Calculation
Tables are a guide. Your actual saving depends on your exact balance, rate, and the specific products available to you. Fill out our 2-minute form at nik.finance and we'll provide a precise saving calculation personalised to your situation.
NIK Finance holds an Australian Credit Licence. Savings figures are estimates and do not account for changes in interest rates over time.