- Rate now
- 5.79%
- Lower rate
- 5.29%
- Ahead after tax and HELP over 10 years
- $12,987
Published · Updated · 1 min read
What does a lower rate save on a rental loan after tax?
A lower rate on a rental loan saves less than its interest figure suggests. The interest on a rental loan comes off the rent before tax, so when the interest falls the deduction falls with it, and some of the saving goes back as tax. The saving that counts is what is left after that.
What does a lower rate save before tax?
For example, an interest only loan of $416,000 on a unit is at 5.79% a year. The comparison puts the same loan at 5.29%, half a point lower, with the same terms and no switching costs, and looks ahead 10 years from 1 July 2026.
At 5.79% the average monthly repayment is $2,007 and the first year's interest is $24,086. At 5.29% they are $1,834 and $22,006.
The repayment falls by $173 a month and the first year's interest by $2,080. Over the 10 years the lower rate is $19,123 ahead before tax.
What is left after tax?
- Ahead before tax
- $19,123
- Less higher tax and HELP
- $6,136
- Ahead after tax and HELP
- $12,987
Interest on a loan that paid for the rental is deductible, as the post on loan purpose sets out. Less interest means a smaller deduction, so the owner's tax and HELP repayment are higher. In the example they are $6,136 higher over the 10 years.
Over the 10 years the lower rate is $19,123 ahead before tax. Tax and HELP take back $6,136, which leaves it $12,987 ahead after tax and HELP.
What would change the answer?
- Switching costs
- $0
- Breaks even
- Day one
- The lower rate ends
- 10 months later
- Switching costs. The example enters none, so it breaks even on day one. Exit fees, new loan fees and valuations each push that day later.
- The term. The lower rate here ends 10 months later, which the page reports as its own line.
- Cashback, which adds to what the switch brings in.
- The owner's other income, which sets the rate the deduction is worth.
How does PropRetire work it out?
On a loan's page, Compare a refinance takes the loan as recorded, applies the new rate, term and costs you enter, and shows the cash difference, the debt difference and the tax and HELP difference separately. The Refinance guide describes each line.