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 40+ 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.