Months until refinance fees recovered.

The only question that matters in a remortgage decision

When refinancing a mortgage (technically "remortgaging"), the central question is whether the monthly saving from the new rate recovers the switching costs in a reasonable number of months. If break-even is below the remaining fixed term of the new deal, refinancing is profitable. If break-even exceeds the new deal's fix period, you will not recover the costs before needing to remortgage again.

This calculator divides total switching costs by monthly savings to show the exact break-even point. A 1,500 fee package recovered at 125 a month savings breaks even in 12 months — anything beyond 12 months on that new product is net gain.

The switching costs it helps to count honestly

Remortgages typically involve four types of cost:

Early Repayment Charge (ERC) on the current deal. Fixed-rate mortgages usually carry ERC of 1 to 5 per cent of the remaining balance if you leave before the fix ends. On a 200,000 balance with 2 per cent ERC, that is 4,000 — often larger than every other switching cost combined. Always check the current mortgage offer for the ERC schedule and fix end date before considering remortgage.

Arrangement fee on the new mortgage. Typically 500 to 1,500, sometimes added to the loan (in which case it also accrues interest). Some "fee-free" products have a upper rate that offsets the missing fee.

Legal and valuation fees. Many remortgage deals include free legals and valuation. Where they don't, budget 300 to 800.

Broker fee. If using a paid broker, 200 to 500. Many brokers are commission-only and charge nothing to the borrower directly.

Sum all of these into the "refi fees" input honestly. A remortgage that looked like a 200 saving per month starts to look very different once the ERC is in the picture.

The monthly saving the calculator needs

The "monthly saving from refi" input should be the difference between the current monthly payment and the new monthly payment at the new rate. It should NOT include the reduction from any equity you might draw out, new term you might extend, or other structural changes that are not directly attributable to the rate reduction.

Be careful with term changes. If the current mortgage has 22 years left and you remortgage onto a new 25-year term, the monthly payment drops partly because you are spreading payments over three more years — that is not a true saving, it is just back-loading interest. To compare apples to apples, keep the new term aligned with the old remaining term when calculating monthly savings.

The fixed-term horizon constraint

Mortgages typically fix for 2, 3, 5, or sometimes 10 years. The break-even calculation becomes a hard constraint when compared to the fix period. If break-even is 18 months and you remortgage onto a 2-year fix, you have 6 months of net benefit before the fix expires and you are back remortgaging again. If break-even is 18 months and you remortgage onto a 5-year fix, you have 42 months of net benefit — a much better deal.

Worked example: ERC 3,000 + fees 1,500 = 4,500 total switching cost. New monthly saving 180. Break-even: 25 months. If moving onto a 5-year fix (60 months), the total net saving over the fix period is 35 months × 180 = 6,300 above what would have been earned by staying put. If moving onto a 2-year fix (24 months), you actually lose money — break-even would not be reached before the next remortgage.

When to remortgage early vs wait

Most lenders allow remortgage applications 3 to 6 months before the current fix ends without triggering the ERC on the old deal. This is the optimal window: rates can be locked in while avoiding the ERC penalty. Remortgaging earlier than that only makes sense when:

Rates are falling fast enough to overcome the ERC. A 1.5 per cent rate drop on a 250,000 mortgage saves roughly 200 a month. Over two years that is 4,800 — potentially enough to cover a 3,000 ERC plus fees and still net ahead. Run the numbers explicitly rather than trusting a broker's enthusiasm.

Your financial situation is changing. Switching to interest-only, raising extra equity, changing names on the mortgage, or consolidating debts may justify remortgaging mid-fix even at a cost.

Product features matter. Offset mortgages, flexible overpayment allowances, or ability to port to a new property can be worth paying for if the circumstance demands them.

The hidden saving most borrowers miss

Remortgaging and simultaneously overpaying by the monthly saving — rather than spending it — turbo-charges the benefit. A 200 a month saving redirected into overpayment can shave three to six years off a 25-year mortgage, saving 30,000 to 60,000 in total interest. The calculator shows when the switching cost is recovered; the bigger decision is what you do with the recovered savings after.

What this tool does not model

It does not account for mortgage interest savings beyond the fix period, changes to the amount of principal versus interest in payments, the impact of overpayments, or whether to switch product type (fix to tracker, repayment to interest-only). For a complete mortgage refinance analysis, combine this output with a full amortisation comparison between old and new mortgages at the same end term.