Refinancing a $600k Mortgage From 6.5% to 5.5%

The short answer

Dropping the rate on a $600,000, 30-year mortgage from 6.5% to 5.5% cuts the monthly principal-and-interest repayment by roughly $385 (from about $3,792 to $3,407). Over a fresh 30-year term that is about $139,000 less interest. There is a catch: most lenders restart the clock at 30 years, so to capture the full saving you usually need to keep repaying at the old amount or set a shorter term. And before you celebrate, subtract switching costs, typically a few hundred to ~$1,000+.

How refinancing savings actually work

When you refinance, you take out a new loan (often with a new lender) to pay out the old one. Two things change. The first is the interest rate, the headline reason to switch: a lower rate means less interest accrues on the same balance each period. The second is the loan term, and this is the part people miss. Refinancing typically resets the term to a new 30 years unless you ask otherwise. Stretching the term lowers the repayment but can quietly add interest, because you're borrowing for longer. Moneysmart warns to be firm about the term you want.

In Australia there is usually no stamp duty to refinance an owner-occupied loan (you're not buying property), but you should budget for switching costs: a discharge fee on the old loan (commonly ~$150–$400), settlement/registration fees on the new mortgage, and possibly LMI again if your loan is above 80% of the property value. LMI is generally not refundable or transferable between lenders. A fixed-rate break fee can also apply if you exit a fixed loan early. Moneysmart's switching guide recommends comparing the comparison rate (which folds in fees), not just the headline rate.

The cleanest way to compare a 6.5% loan against a 5.5% loan is total cost over the life of the loan, not just the monthly repayment, because a lower repayment on a longer term can still cost more overall.

Worked example

Brand-new $600,000 loan, 30-year term, principal & interest, monthly:

	6.5%	5.5%
Monthly repayment	$3,792	$3,407
Total interest (30 yrs)	$765,267	$626,424
Total cost	$1,365,267	$1,226,424

Monthly saving ≈ $385. Lifetime interest saving ≈ $138,843.

More realistic: refinancing a loan you're already partway through. Say you've paid a $600,000 loan at 6.5% for 5 years; the balance is about $561,666 and you're still paying $3,792/month. Refinancing the remaining balance at 5.5%:

New term chosen	New repayment	Monthly saving vs $3,792
25 years (matches time left)	$3,449	$343
30 years (term reset)	$3,189	$603

The 30-year option looks like a bigger win, but you've now signed up for 35 total years of debt, and the extra five years of interest can erode much of the saving. Picking 25 years keeps your payoff date the same while still pocketing ~$343/month. The maths is the standard amortisation formula, so you can check every figure yourself.

Model this in True Loan

Use the side-by-side comparison tool to put both loans next to each other.

1. Scenario A (current loan): set Loan amount to your remaining balance (e.g. $561,666, not the original $600k if you've been paying it down), Interest rate 6.5%, Term to the years you have left, P&I, monthly.
2. Scenario B (refinanced): same balance, Interest rate 5.5%, and choose your Term. Set it to the same years remaining to compare like-for-like, or 30 to see the reset effect.
3. Compare the total interest and timeline of remaining debt rows, not just the repayment.

To model paying the old (higher) amount into the cheaper loan to clear it faster, use the Extra repayment ($/month) input. That's a separate input from the Offset balance field. If you also keep savings in an offset account, enter that sustained balance in Offset balance so interest accrues on the loan minus offset. Every scenario is shareable via its URL.

Start here: trueloan.app.

Common questions and mistakes

Does a 1% rate drop halve nothing, and is it even worth it? On $600k it's roughly $385/month. See is refinancing worth it for a 0.5% lower rate for the smaller-gap case.

Will refinancing reset my loan term? Usually yes, back to 30 years unless you specify otherwise, covered in does refinancing reset your loan term.

What does switching cost? Discharge, settlement and registration fees, plus possible LMI or break fees. See cost to refinance a home loan in Australia, and use Moneysmart's mortgage switching calculator to find your break-even.

Do I pay LMI again? If your loan is over 80% of the property's value, the new lender may charge LMI, and your original premium generally isn't transferable.

Mistake: comparing repayments, not total cost. A lower repayment on a longer term can cost more overall. Always check lifetime interest.

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Figures here are estimates for the 2025–26 financial year and depend on your exact balance, term and lender fees. Verify current rates and costs with your lender and moneysmart.gov.au. This is general information, not financial or credit advice.