Refinance Break-Even Calculator: Is It Worth It for You?

What Is the Break-Even Point?

The break-even point is the number of months it takes for your cumulative savings from a lower rate to exceed the total cost of switching loans. Once you've passed your break-even, every month of lower repayments is pure financial gain.

The Formula

Break-Even Months = Total Switching Costs ÷ Monthly Saving

Where: Monthly Saving = (Current rate – New rate) ÷ 12 × Loan balance

Worked Example

Sarah has a $600,000 loan at 6.5%. She's offered 5.89% by a new lender. Her switching costs total $1,250 (discharge + government fees).

• Monthly saving: $600,000 × 0.0061 / 12 = $305/month
• Break-even: $1,250 ÷ $305 = 4.1 months
• After 4 months she's in profit - saving $305/month indefinitely

What Switching Costs Should I Include?

• Discharge fee from current lender: $150–$400
• Government mortgage discharge registration: ~$150
• New lender establishment fee: $0–$600 (often waived)
• Subtract any cash-back offered by the new lender ($2,000–$4,000 with some lenders)

The Cash-Back Trap

Some lenders offer $2,000–$4,000 cash-back to attract new borrowers. This can make your effective switching cost negative. But be cautious: cash-back lenders sometimes charge slightly higher ongoing rates. Always calculate the total cost of ownership over 3 years - not just the upfront cash-back. A $4,000 cash-back means nothing if you're paying $1,800 more per year in interest.

When Break-Even Is Long

If your break-even is 18–36 months, consider: how long do you plan to stay in the property? If you're selling in 2 years, a 24-month break-even probably doesn't make sense. But if you're staying for 5+ years, even a longer break-even delivers massive long-term savings.

Use our break-even calculator to run your exact numbers in 60 seconds.