How Much Could You Save by Switching Your Home Loan?

Switching your home loan isn't something most people think about until something prompts them — a rate rise, a conversation with a friend, or a nagging feeling that you might be paying too much. But for many Australian borrowers, the numbers make a compelling case for at least taking a look.

So let's talk about what the savings can actually look like — and what to factor in before you make a move.

The Rate Gap Is Often Bigger Than You Think

One of the most consistent patterns in the Australian mortgage market is the gap between what existing customers pay and what new customers are offered.

Lenders frequently reserve their sharpest rates for people coming through the door, while long-term customers quietly sit on older, less competitive products.

This gap varies over time and between lenders, but it's not uncommon for existing borrowers to be paying 0.3% to 0.7% more than they would on a comparable product today. On a large loan, that difference adds up quickly.

Running the Numbers: What a Rate Difference Actually Means

The simplest way to understand the potential saving is to look at the dollar impact of a rate difference on a typical loan.

Take a $600,000 loan with 25 years remaining:

• At 6.50%, monthly repayments are approximately $4,058

• At 6.00%, monthly repayments are approximately $3,866

• Difference: roughly $192 per month, or $2,304 per year

  
  

Drop the rate by 0.75% and you're looking at closer to $3,500 in annual savings. Over five years, that's $17,500 — before accounting for the effect of making those savings work harder through an offset account or extra repayments.

For a $800,000 loan, the same rate difference produces proportionally larger savings — potentially $3,000 or more per year from a 0.5% rate reduction alone.

These are illustrative figures, and your actual saving will depend on your loan balance, remaining term, and the specific rates available to you. But they give a useful sense of the scale.

It's Not Just About the Rate

The interest rate is the biggest lever, but it's not the only one. Switching loans can also deliver savings — or better value — in other ways:

• Removing annual package fees — some older loan packages charge $300–$400 per year for features you may not be using. A newer, simpler loan might offer a better rate with no annual fee at all.

• Gaining access to an offset account — if your current loan doesn't have one, switching to a loan with an offset account can save you significant interest over time. Every dollar sitting in your offset reduces the balance your interest is calculated on.

• Consolidating debt — if you have personal loans or credit card debt at higher interest rates, refinancing to roll those into your mortgage can reduce your total monthly outgoings, though it's important to understand the long-term implications of extending the repayment period on those debts.

  
  

Don't Forget to Factor In the Switching Costs

A potential saving is only meaningful if it clears the cost of getting there. Before making any decision, it's worth calculating your break-even point — how long it takes for the savings to outweigh the cost of switching.

Typical refinancing costs to account for:

• Discharge fee from your current lender: $150–$400

• Break costs if you're on a fixed rate (can be significant — worth checking with your lender)

• Application or establishment fee with the new lender: $0–$600 (many lenders waive this)

• Valuation fee: $200–$600

• Legal/settlement fees: $200–$400

  
  

In total, switching costs for a straightforward refinance commonly land somewhere between $500 and $1,500 for a variable rate loan, though fixed rate break costs can push this considerably higher.

If you're saving $3,000 a year and it costs $1,200 to switch, you've broken even in under five months. That's a strong case for moving. If the numbers are closer, it's worth thinking about how long you plan to stay in the property and whether the savings justify the effort.

Cashback Offers: Worth It or a Distraction?

Some lenders offer cashback incentives — sometimes $2,000 to $4,000 — to attract refinancers. These can be genuinely useful in offsetting switching costs, but they shouldn't be the primary reason to move. A lender offering a large cashback on a rate that's only marginally better than your current one may not actually leave you ahead over the medium term.

Always look at the total picture: rate, features, fees, and any incentives — not just the upfront payment.

How to Find Out What You Could Actually Save

The most reliable way to know your specific saving is to have your current loan reviewed against what's available in the market today. A mortgage broker can do this across multiple lenders at once, factoring in your loan balance, remaining term, and financial situation — and give you a clear picture of whether switching makes financial sense.

There's no obligation to proceed, and in many cases the answer might simply be: your loan is actually pretty competitive, sit tight. That's a useful thing to know too.

Curious what the numbers look like for your loan? Book a free loan health check with Cultivate Financial — we'll show you exactly where you stand and whether switching is worth it.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend you consider whether it is appropriate for your circumstances. It does not constitute legal, tax or financial advice — please seek professional advice for your individual situation.