How Much Can I Save by Refinancing My Mortgage?

You could be saving anywhere from $3,000 to $15,000 annually by refinancing your mortgage, depending on your loan amount and the rate difference between your current loan and what's available now.

The actual savings depend on three things: the gap between your current interest rate and what you can access, how much you still owe, and how long you plan to keep the property. Someone with a $600,000 loan sitting at 6.2% who refinances to 5.6% will save roughly $3,600 in the first year alone. Over a typical five-year period, that adds up to more than $17,000, accounting for the declining loan balance.

When Refinancing Delivers Real Savings

Refinancing makes financial sense when the interest you'll save exceeds the costs of switching lenders. Application fees, valuation costs, and discharge fees from your current lender typically total between $800 and $1,500. If you're coming off a fixed rate period, you also need to factor in any break costs, which can run into thousands if you exit early.

Consider someone who took out a $750,000 loan three years ago at a fixed rate of 2.9% for three years. That rate has now expired, and their lender has moved them to a variable rate of 6.5%. By refinancing to a variable rate of 5.8%, they'll save around $5,250 in the first year. Even after paying $1,200 in switching costs, the move puts them ahead by more than $4,000 within 12 months. If you're in a similar position with a fixed rate expiry approaching or already behind you, the numbers often stack up quickly.

Calculating Your Actual Savings

Your savings come down to the difference in monthly repayments multiplied by how many months you hold the loan. Take a $500,000 mortgage at 6.0% with 25 years remaining. Monthly repayments sit at around $3,220. Drop that rate to 5.4% through refinancing, and repayments fall to roughly $3,060. That's $160 per month, or $1,920 annually.

Over five years, you're looking at nearly $9,600 in saved interest. If you plan to hold the property for a decade or more, those savings compound further as each dollar saved reduces the principal faster. A loan health check can show you exactly where your current loan sits compared to what's available, and whether the math works in your favour.

What Refinancing Costs You Need to Account For

Application fees range from zero to around $600, depending on the lender. Property valuations usually cost between $200 and $400, though some lenders waive this if your loan-to-value ratio is low enough. Your current lender will charge a discharge fee, typically $300 to $500, to release the mortgage. If you're switching from a fixed rate loan before the term ends, break costs can add thousands more, calculated on the difference between your fixed rate and current wholesale rates.

In our experience, most people underestimate how quickly switching costs are absorbed by the ongoing interest savings. If you're saving $400 per month, a $1,200 cost is recovered in three months. After that, every dollar saved goes directly into your pocket or reduces your loan balance faster.

Accessing Lower Rates and Improved Features

Lenders compete hardest for new customers, which means refinancing often unlocks rates that existing customers don't see advertised. Your current lender may have you on a variable interest rate that's 0.5% to 0.8% higher than what they're offering new borrowers. Refinancing levels that playing field.

Beyond the rate, switching can also give you access to features your current loan doesn't offer. Offset accounts, redraw facilities, and the ability to make unlimited extra repayments without penalty can all improve your cashflow and reduce the total interest you pay over the life of the loan. If your current loan lacks an offset account and you typically hold $20,000 in savings, pairing that with your mortgage through refinancing effectively reduces your loan balance for interest calculation purposes, saving you another $1,000 or more each year at current rates.

When Refinancing Doesn't Make Sense

If the rate difference is less than 0.3% and you're planning to sell within two years, the upfront costs often outweigh the savings. Refinancing also ties you into a new loan, which may come with its own restrictions if you need flexibility soon after.

Another scenario where switching may not make sense is if you're looking to access equity for other purposes and the new loan amount significantly increases your repayments without a corresponding rate benefit. Releasing equity in your property to fund renovations or an investment purchase can be worthwhile, but only if the overall loan structure improves your position or enables something that generates value elsewhere.

Moving From Fixed to Variable or Vice Versa

Switching between fixed and variable interest rates through refinancing gives you the chance to lock in certainty or take advantage of potential rate cuts, depending on where the market sits. If you're currently on a variable rate above 6.0% and you want predictable repayments for the next few years, refinancing to a fixed rate locks that in. Conversely, if you're coming off a fixed term and expect rates to stabilise or fall, staying variable or splitting your loan between fixed and variable can give you both security and flexibility.

As an example, someone with a $550,000 loan who splits $350,000 onto a three-year fixed rate at 5.7% and keeps $200,000 variable at 5.9% protects most of their repayments from rate rises while retaining the ability to make extra repayments on the variable portion without penalty. Refinancing is often the moment to restructure your loan in a way that suits your current financial situation and goals.

Mortgage Guardian works with clients nation-wide to compare what's available and calculate whether refinancing will put you ahead. Call one of our team or book an appointment at a time that works for you to run the numbers on your loan and see how much you could actually save.

Frequently Asked Questions