Should I Remortgage?

Rezumat

Remortgaging means replacing your current mortgage with a new one — either with the same lender (a product transfer) or a different lender. The main reason is to get a lower interest rate and reduce monthly payments. But switching has costs: arrangement fees, valuation fees, legal fees, and potentially an early repayment charge (ERC). The calculator works out whether the interest savings outweigh these costs, and how long it takes to break even.

Cum funcționează

The remortgage decision boils down to three numbers:

1. Monthly saving — how much less you’d pay each month with the new rate
2. Total switching cost — all the fees and charges involved in switching
3. Break-even time — how many months of savings it takes to recoup the switching cost

If the net benefit (interest saved minus switching costs) is positive and the break-even point falls well within your new deal period, switching is worthwhile.

Typical UK remortgage costs

Early repayment charges (ERCs)

An ERC applies if you leave your mortgage before the end of the fixed or discounted period. It is calculated as a percentage of your outstanding balance (not the original loan). ERCs typically reduce year by year — for example, 3% in year 1, 2% in year 2, 1% in year 3.

Most lenders allow penalty-free overpayments of up to 10% of the outstanding balance per year.

When to start looking

MoneyHelper recommends starting to explore remortgage options 6 months before your fixed deal ends to avoid rolling onto your lender’s Standard Variable Rate (SVR), which is typically 2–3 percentage points higher than fixed deals.

Formula

Exemplu rezolvat

Intrări explicate

• Outstanding balance — how much you currently owe on your mortgage
• Current interest rate — your existing annual rate
• Remaining term — years left on your current mortgage
• Early repayment charge — the ERC percentage (check your mortgage offer letter; 0% if your fix has ended)
• New interest rate — the rate on the new deal you’re considering
• New term — how long the new mortgage would run (often matched to remaining term)
• Arrangement fee — the new lender’s product fee
• Valuation fee — cost of the property valuation (often waived for remortgages)
• Legal fee — conveyancing/solicitor cost (often free via the lender)

Rezultate explicate

• Monthly saving — how much less you’d pay per month
• Interest saved — total interest difference over the full term
• Total switching cost — all fees and charges itemised
• Net benefit — interest saved minus switching cost (positive = worth switching)
• Break-even — months until cumulative savings exceed switching costs
• Verdict — a plain-English recommendation based on the numbers

Ipoteze și limitări

• The calculator assumes repayment mortgages (not interest-only).
• Both current and new deals use a fixed rate for the entire term. In practice, most fixes are 2–5 years with a reversion to SVR. The calculator is most useful for comparing the initial fixed period.
• The new mortgage is taken on the same outstanding balance — it does not model borrowing additional funds.
• The break-even calculation uses a simple monthly-saving model: switching cost ÷ monthly saving. It does not account for the time value of money.
• The ERC is calculated as a percentage of the current outstanding balance. Check your mortgage offer for the exact terms, as some lenders use different bases.
• Other costs (exit fees, broker fees) are not included — add them to the arrangement fee field for a more complete picture.

Verificare

Accounting identity: Net benefit = Interest saved − Total switching cost. If monthly saving > 0, break-even months = ⌈Total switching cost ÷ Monthly saving⌉.