Refinance Break-Even Calculator: Methodology

Monthly ledger and equal-period comparison

Each scenario calculates its scheduled principal-and-interest payment from the entered balance, rate and term. Monthly interest is applied to the balance above the entered constant offset amount. The model tracks payments, cumulative interest and closing debt.

Economic cost over the horizon equals payments made plus remaining debt, minus original debt, plus cash fees and recurring fees, less cashback where applicable. Financed switching fees increase the proposed principal, so they remain in the comparison through payments and remaining debt. They are not counted again as a cash fee.

What break-even means

Break-even is the first modelled month in which the proposed cumulative economic cost is no higher than keeping the current loan. It is not a guarantee the result stays better under future rate or offset changes.

Repricing keeps the existing term and entered existing annual fee. An identical extra monthly amount is added to the scheduled payment of every scenario; it does not force identical total repayments when the scheduled minimums differ.

What the model does not simulate

Rates and offset cash are held constant. It approximates interest monthly, not by a lender-specific daily calendar. Growing offset cash, changing rates, future credit approval and tax consequences are outside this model. Recurring fees continue through the comparison horizon, so use a horizon and fees consistent with when you expect to hold the facility.

For salary accumulating in offset and term-reset questions, read resetting to 30 years with an offset and use the repayment calculator for the changing-offset path.

Sources and verification

• Moneysmart — Switching home loans
• Moneysmart — Mortgage offset accounts
• APRA — Macroprudential policy settings

General information only. It is not personal financial, tax or legal advice. Finance approval, pricing and structure are subject to lender assessment and your circumstances.