Remortgage Calculator – Is Switching Worth It? Break-Even and True Saving

Watch the switch pay for itself

The curve is your position versus staying put, month by month: payments saved plus balance gained, minus the fees and ERC you paid on day one. It starts underwater — £2,999 down on the default example — climbs as the lower rate bites, and crosses zero at the break-even month. Everything after the crossing is real saving.

The rest of the remortgage picture

Switching sits inside the same loan you already have — these tools work the other angles of it.

How it works

Both deals are run as full amortisations, then compared over the fixed window only.

The math behind the default example

Three remortgage traps worth knowing

A fee that quietly eats a lower rate, a payment that rises while the deal gets better, and the cliff waiting at the end of every fix.

True saving, and why it is not the monthly saving times 24

The headline monthly difference is £194.39. The true saving is £3,913.08. The gap between them is the whole method.

On the default, the current deal costs £1,432.86 a month and the new deal £1,238.47, a difference of £194.39 a month. Multiplied by the 24 months of the fix, that is £4,665.44 of payments saved. But payments are only one part of the cost of a fix. The balance still owed at the end of the fix also differs: £188,991.47 on the current deal against £186,744.83 on the new deal, a gap of £2,246.64 in the new deal’s favour, because the lower rate leaves more of each payment for principal. Add the two gains, £4,665.44 and £2,246.64, and the gross benefit is £6,912.08. Subtract the fees and early repayment charge of £2,999.00, paid upfront, and the true saving is £3,913.08. That is the figure the calculator headlines, and it is the only figure that answers the question of whether switching is worth it.

Each of the three components deserves attention, because each can overturn a decision on its own. The payments saving is certain, provided the payments are actually made, and it scales with the rate difference and the balance: a larger balance or a larger rate drop increases it proportionally. The balance gap is less visible but equally real, because a lower balance at the end of the fix is wealth, even though it is not cash in hand: it means less to repay, less to remortgage next time, and less interest in every future month. The fees are the drag, and they are paid on day one, before any saving arrives, which is why the curve on this page starts £2,999 underwater and climbs. A deal whose fees exceed the gross benefit is a deal that loses money even though its monthly payment is lower, and that is the trap the fee-free comparison on this page exists to catch.

The break-even month ties the three components together in time. On the default, the switch starts paying off in month 11 of 24, which means eleven months of lower payments and balance improvement are needed to recover £2,999 of upfront cost, and thirteen months of pure gain follow. A break-even month comfortably inside the fix is the practical test of a deal: it leaves margin for the unexpected, such as a need to move or remortgage again before the fix ends, which would strand the remaining benefit. A break-even month at or beyond the end of the fix means the deal never pays off within the period it was bought for, however attractive its monthly payment looks, and it should be rejected on that ground alone, whatever the headline rate says.

At a lower new rate of 3.50 percent, the same method gives a true saving of £6,855.39, a break-even month of 8, a new payment of £1,159.92, a monthly difference of £272.94, and a balance gap of £3,303.77. The improvement from 4.25 to 3.50 percent is worth £2,942.31 of true saving and three months of earlier break-even, which shows how sensitive the answer is to the rate: three quarters of a point is worth nearly three thousand pounds on this balance and term. That sensitivity is also a warning. A quoted rate that moves by a quarter point between illustration and offer moves the true saving by roughly a thousand pounds, so the comparison should be re-run on the offered rate, not the illustrated one, before any decision is made.

Fees, ERC, and the deal that looks cheaper but is not

Headline rates are ranked. Deals should be ranked by total cost, and total cost includes everything paid on day one.

Fees on a remortgage come in several forms, and the calculator on this page combines them into a single upfront figure, £2,999.00 on the default, which includes the product fee and any early repayment charge. Product fees, sometimes called arrangement fees, are charged by the new lender for the deal, and they may be added to the loan rather than paid upfront, which changes their cost: a fee added to the loan accrues interest for the whole term, while a fee paid upfront does not. Valuation fees, legal fees, and broker fees may be charged separately, or bundled, or waived as incentives, and the treatment varies by lender and by deal. The honest comparison adds every fee, however labelled, to the cost side, because the label does not change the cash, and a fee-free deal with a slightly higher rate can beat a low-rate deal with a large fee, as the page’s traps section demonstrates.

The early repayment charge, ERC, deserves its own paragraph, because it is the largest single upfront cost for many switchers and the least understood. An ERC is charged by the current lender when a fixed deal is left early, and it is usually expressed as a percentage of the outstanding balance, falling over the fixed period: a common shape is 5 percent in the first year, falling by a point a year, though the exact scale is in the mortgage offer. On a £200,000 balance, a 1 percent ERC is £2,000, and a 2 percent ERC is £4,000, either of which can erase the saving from a modest rate drop. The ERC is also time-sensitive: waiting until the fix ends removes it entirely, so a switch that loses money today may become profitable in a few months as the ERC falls or expires. The calculator asks for the ERC as a figure, and the right figure is the one the current lender quotes for the actual switch date, not the headline percentage applied to a remembered balance.

Other upfront costs hide in the small print. An exit fee, sometimes called a deeds release fee, may be charged by the outgoing lender on redemption, typically a few hundred pounds. A higher lending charge may apply where the loan-to-value is high, though it is less common than it once was. Telegraphic transfer fees, land registry fees, and conveyancing disbursements are small individually and material together, and they should be included in the fees figure rather than ignored. The discipline is simple: if money leaves your account because of the switch, it belongs in the cost side, whatever it is called, and a comparison that omits a fee is a comparison that favours the deal with the most hidden fees.

Finally, consider the fee structure’s effect on the balance. A product fee added to the loan increases the balance on day one, which increases every subsequent payment’s interest slice and reduces the balance gap at the end of the fix. The calculator on this page treats fees as paid upfront in its default presentation, and a fee added to the loan should be modelled by increasing the new balance accordingly, or by adding the fee’s interest cost by hand. The difference is small over a two-year fix and larger over a longer one, and it is worth getting right where the fee is large, because a £999 fee added to a £200,000 loan at 4.25 percent costs about £85 of extra interest over two years, on top of the fee itself. Small numbers compound, and remortgage arithmetic is entirely about compounding.

Term changes: the payment that rises while the deal gets better

A shorter term raises the payment and can still be the better deal. The test is total cost, not monthly cash.

The default keeps the term at 20 years on both deals, so the comparison is clean: same balance, same term, different rate, and the lower rate wins on every measure. Real remortgages often change the term as well, and term changes break the simple reading. Shortening the term raises the monthly payment, because the same balance must be repaid in fewer instalments, and a borrower who only looks at the payment will reject a shorter term as more expensive. But a shorter term also repays principal faster, which reduces the balance at the end of the fix and reduces total interest over the life of the loan, and those gains can outweigh the higher payment. The page’s traps section gives the shape: a higher payment that is still the better deal, because the balance gap dominates the payment difference.

Lengthening the term does the opposite, and it is the more dangerous direction. Extending the term lowers the monthly payment, which feels like a saving, but it stretches the repayment, increases total interest, and leaves a larger balance at the end of the fix, all of which the true-saving calculation captures if the new term is entered correctly. A borrower who extends the term to afford a larger balance, or to release cash, is making a legitimate choice, but it should be made knowingly, with the total cost and the end-of-fix balance in view, not as an accidental consequence of chasing a lower payment. The calculator’s method — run both deals as full amortisations, compare over the fixed window — handles term changes correctly, provided the terms entered are the actual terms, not the terms wished for.

Term also interacts with age and retirement planning, in a way the calculator cannot model but the borrower must consider. A term that extends past planned retirement means mortgage payments from retirement income, which may be lower and less certain, and a term that ends well before retirement means higher payments during working years in exchange for freedom later. Neither is right in general, and the right term depends on income trajectory, pension provision, and plans for the property. What the calculator can do is price each term option exactly, so that the lifestyle choice is made with its cost known, rather than with its cost hidden inside a monthly payment that looks affordable.

The practical rule for term changes is to compare like with like first, then vary one thing at a time. Run the comparison with the term unchanged, to isolate the rate effect. Then run it with the proposed term, to see the combined effect. The difference between the two runs is the term effect, and it should be judged on its own merits: does the balance improvement justify the payment increase, does the payment reduction justify the balance cost, and does the end-of-fix position leave the borrower better placed for the next deal. A term change that improves the end-of-fix balance while keeping the payment affordable is usually a good change. A term change that lowers the payment by leaving a larger balance is a borrowing decision disguised as a saving, and it should be recognised as such.

After the fix: the cliff, the SVR, and the next decision

A two-year fix is a two-year decision. What happens in month 25 matters as much as what happens in months 1 to 24.

When a fixed period ends, the mortgage does not end. It typically reverts to the lender’s standard variable rate, SVR, which is usually substantially higher than the fixed rate, and which can move at the lender’s discretion, subject to the terms of the offer. Drifting onto the SVR is the most expensive common outcome in remortgaging, because the borrower continues paying a high rate while doing nothing, and the cost accumulates monthly without any decision being taken. The calculator on this page compares deals over the fixed window only, and it does not price the SVR period, which is correct for comparing fixes, but incomplete for planning: the plan must include a diary date, several months before the fix ends, to arrange the next deal, so that the SVR period is days, not months.

The balance at the end of the fix is the starting point for the next decision, and it is one of the two gains the true-saving calculation counts. On the default, the new deal leaves £186,744.83 owed after 24 months, against £188,991.47 on the current deal, a difference of £2,246.64. That lower balance means a lower loan-to-value at the next remortgage, which can unlock better rates, and it means less interest in every future month, whatever rate applies next. A borrower who only counts the payments saved during the fix understates the benefit by the whole balance gap, and a borrower who plans the next deal from the end-of-fix balance, rather than from the original balance, will negotiate from a stronger position.

Early repayment charges also reset with the new deal, and the new deal’s ERC scale should be read before signing, not discovered when the next switch is considered. A two-year fix typically carries an ERC for the two years, falling over the period, and a borrower who needs to move or remortgage again within that window will face it. The cost of flexibility is real, and it should be weighed against the saving: a slightly higher rate with no ERC, or with a shorter fix, may be worth more than a lower rate locked behind a large charge, for a borrower whose plans are uncertain. The calculator models the ERC of leaving the current deal. The next deal’s ERC is a future cost, and it belongs in the decision even though it does not appear in the current comparison.

Finally, keep the remortgage file with the same care as a purchase file. The offer, the ERC scale, the fee breakdown, the completion statement, and the diary date for the next review should be kept together, because the next decision will need all of them, and reconstructing them under time pressure, near the end of a fix, is how SVR drift happens. A remortgage is not a one-time event but a cycle, roughly every two to five years for most borrowers, and each cycle’s paperwork is the next cycle’s starting point. The calculator’s comparison is a single cycle’s maths. The file is what turns single cycles into a managed mortgage, and a managed mortgage, over decades, is worth far more than any single fix’s saving.

True saving is not the monthly saving times 24

Fees, ERCs and the rate after the fix decide the saving — the monthly gap only starts the story.

A deal that saves £200 a month for two years has not saved £4,800. From that £4,800 come the arrangement fee, the valuation and legal costs, and any early repayment charge on the loan being left — and the comparison must also price what happens when the fix ends, because the standard variable rate that follows is usually the most expensive rate the lender offers. True saving is the whole cost of the new deal over the whole horizon, set against the whole cost of staying put over the same horizon, with every fee counted once and the post-fix rate honestly included.

The arithmetic of small rate moves helps the judgement: on a £200,000 balance, each 0.25% of rate is £500 a year — £1,000 over a two-year fix. A deal 0.25% cheaper that charges a £1,499 fee has therefore saved nothing over two years before any other cost is counted, while the same deal with no fee has saved the full £1,000. Fees are certain; rate savings are conditional on staying the course. The fee belongs in the first line of the comparison, not the last.

Fees, ERCs, term changes and the post-fix cliff: remortgaging explained.

Early repayment charges: the exit fee that decides whether switching pays

ERCs usually step down year by year — and the cheapest year to leave is rarely the first.

An early repayment charge is a percentage of the outstanding balance, charged for leaving a fixed deal early, and it typically steps down with each year of the fix — highest in year one, lower later, nil after the fix ends. The charge is the reason a remortgage that looks cheaper on rate can cost more overall: the saving is monthly and future, while the ERC is immediate and certain. Before switching, price the ERC on the actual balance at the actual date, add the new deal’s fees, and compare that total with the saving over the months remaining on the current fix — not over the full term of the new one.

Two timing disciplines follow. First, most lenders let you agree a new deal three to six months before the current fix ends, so the switch can land on the day the ERC expires rather than weeks after it. Second, a shorter remaining fix argues for waiting: paying an ERC to escape a deal with months left rarely repays, while the same ERC with years left sometimes does, because the saving has longer to run. The ERC is not a reason never to switch; it is the price of switching early, and prices belong in the comparison.

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