Remortgage Rates Calculator

Calculate your potential monthly savings and costs when remortgaging to a new rate.

Remortgage Calculator Inputs

Remortgage Calculation Formula

The calculator uses the standard mortgage payment formula (annuity formula) to determine monthly payments, and then compares the total costs.

Monthly Payment (M) = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:

• P = Principal Loan Amount (Current Mortgage Balance)
• i = Periodic Interest Rate (Annual Rate / Number of Payments Per Year)
• n = Total Number of Payments (Remaining Term in Years * Number of Payments Per Year)

Total Paid = Monthly Payment * Number of Payments

Overall Savings/Cost = (Total Paid Current) – (Total Paid New + Remortgage Fees)

What is a Remortgage Rate?

A remortgage rate refers to the interest rate offered by a lender when you switch your existing mortgage to a new deal, either with your current provider or a new one. This process is commonly known as remortgaging. Choosing the right remortgage rate is crucial as it directly impacts your monthly payments and the total amount of interest you'll pay over the life of your loan.

When your current mortgage deal (like a fixed-rate period or an introductory offer) comes to an end, you typically move onto your lender's Standard Variable Rate (SVR), which is often much higher. Remortgaging allows you to secure a new, potentially lower, interest rate before this happens, helping you to save money. It's an important financial decision that requires careful consideration of current market conditions, your personal financial situation, and the various fees associated with new mortgage products.

Who should use this calculator? Anyone whose current mortgage deal is ending, looking to switch to a lower interest rate, or seeking to release equity from their home. It's particularly useful for comparing the financial implications of moving from a higher rate to a potentially lower one.

Common misunderstandings: A frequent misunderstanding is focusing solely on the interest rate without considering the impact of upfront fees. High fees can sometimes negate the savings from a lower rate, especially if you plan to move or remortgage again in the short term. Another is assuming the remaining term stays the same; remortgaging can sometimes involve resetting the term, which affects monthly payments and total interest paid.

Remortgage Rates Calculator Formula and Explanation

Our Remortgage Rates Calculator provides an estimate of your potential financial changes when you remortgage. It calculates your current monthly mortgage payment and the projected payment with a new interest rate, factoring in the remaining term and any associated fees.

The core of the calculation relies on the annuity mortgage formula to determine the fixed periodic payment required to amortize a loan over a set period. The formula is applied to both your current mortgage situation and the proposed new mortgage deal.

Formula Used:

P = [ V * i ] / [ 1 – (1 + i)^(-n) ]

Where:

Variables Used in Calculation

Variable	Meaning	Unit	Typical Range
P (Payment)	Monthly Mortgage Payment	Currency (£)	£500 – £5,000+
V (Principal)	Loan Balance	Currency (£)	£10,000 – £1,000,000+
i (Periodic Rate)	Interest rate per payment period	Unitless (Decimal)	0.001 – 0.1 (e.g., 0.038/12 for 3.8% annual rate paid monthly)
n (Number of Payments)	Total number of payments remaining	Unitless (Count)	60 – 360+

The calculator first determines the current monthly payment using these variables. Then, it calculates the new monthly payment using the new interest rate. Finally, it compares the total amount paid over the remaining term, factoring in remortgage fees to show overall potential savings or increased costs.

Practical Examples

Let's explore a couple of scenarios to illustrate how the remortgage calculator works:

Example 1: Significant Savings Potential

Scenario: Sarah has £180,000 remaining on her mortgage with 20 years left. Her current rate is 5.0% per year, and her monthly payment is approximately £1,166. She's found a new deal with a rate of 3.5% per year, with £1,200 in remortgage fees, and wants to keep the same remaining term.

• Current Mortgage Balance: £180,000
• Current Annual Interest Rate: 5.0%
• New Annual Interest Rate: 3.5%
• Remaining Mortgage Term: 20 years (240 months)
• Remortgage Fees: £1,200

Calculator Output:

• Current Monthly Payment: ~£1,166
• New Monthly Payment: ~£1,021
• Estimated Monthly Savings: ~£145
• Total Paid Over Remaining Term (Current): ~£279,840
• Total Paid Over Remaining Term (New): ~£245,040
• Total Cost Including Fees (New): ~£246,240 (£245,040 + £1,200)
• Overall Savings/Cost: ~£33,600 (£279,840 – £246,240)

In this case, remortgaging offers substantial monthly savings and significant overall savings despite the fees.

Example 2: Lower Rate, Higher Fees

Scenario: Mark owes £250,000 on his mortgage with 15 years remaining. His current rate is 4.2% (£1,857/month). He's offered a new rate of 3.0% but with £3,000 in fees.

• Current Mortgage Balance: £250,000
• Current Annual Interest Rate: 4.2%
• New Annual Interest Rate: 3.0%
• Remaining Mortgage Term: 15 years (180 months)
• Remortgage Fees: £3,000

Calculator Output:

• Current Monthly Payment: ~£1,857
• New Monthly Payment: ~£1,677
• Estimated Monthly Savings: ~£180
• Total Paid Over Remaining Term (Current): ~£334,260
• Total Paid Over Remaining Term (New): ~£301,860
• Total Cost Including Fees (New): ~£304,860 (£301,860 + £3,000)
• Overall Savings/Cost: ~£29,400 (£334,260 – £304,860)

Even with higher fees, the lower interest rate leads to considerable overall savings.

How to Use This Remortgage Rates Calculator

1. Enter Current Mortgage Balance: Input the exact amount you still owe on your mortgage.
2. Input Current Annual Interest Rate: Enter your current mortgage's annual interest rate as a percentage (e.g., 4.5 for 4.5%).
3. Input New Annual Interest Rate: Enter the new annual interest rate you are considering from a potential remortgage deal.
4. Specify Remaining Mortgage Term: Enter the number of years left on your mortgage. Ensure this is consistent for both current and new scenarios for a like-for-like comparison.
5. Add Remortgage Fees: Sum up all the costs associated with the new mortgage deal (e.g., arrangement fees, valuation fees, legal costs) and enter the total.
6. Select Payment Frequency: Choose how often you make your mortgage payments (e.g., Monthly, Fortnightly).
7. Click 'Calculate Savings': The calculator will display your current monthly payment, the new projected monthly payment, estimated monthly savings, total amounts paid over the remaining term, and the overall financial impact considering fees.
8. Interpret Results: A positive 'Overall Savings/Cost' indicates you could save money by remortgaging. A negative figure suggests the costs (fees) outweigh the interest savings over the remaining term.
9. Use the 'Reset' Button: To start over with new figures, click the 'Reset' button.
10. Copy Results: Use the 'Copy Results' button to save or share your calculated figures.

Selecting Correct Units: Ensure all currency values are entered in £ (or your local currency if applicable). The interest rates must be entered as annual percentages. The term must be in years.

Key Factors That Affect Remortgage Rates

Several elements influence the remortgage rates you'll be offered and the overall cost of your new deal:

1. Loan-to-Value (LTV) Ratio: This is the ratio of your mortgage debt to the value of your property. Lenders offer lower rates to borrowers with lower LTVs (e.g., below 75%) because they represent lower risk.
2. Credit Score: A strong credit history demonstrates responsible borrowing. A higher credit score typically qualifies you for better interest rates.
3. Market Conditions: The Bank of England base rate and broader economic factors significantly influence the mortgage market. When the base rate rises, mortgage rates tend to follow, and vice versa.
4. Mortgage Term Length: Shorter terms usually have higher monthly payments but less interest paid overall. Longer terms reduce monthly payments but increase the total interest paid. Your choice can affect the rate offered.
5. Type of Mortgage Product: Fixed rates offer payment certainty, while variable or tracker rates can fluctuate. The perceived risk and market expectations for each type influence their offered rates.
6. Lender's Specific Criteria: Each lender has its own risk appetite, lending policies, and profit margins, leading to variations in the rates and fees they offer.
7. Remortgage Fees: While not affecting the rate itself, high arrangement, valuation, or legal fees can significantly increase the total cost of the loan, impacting the overall financial benefit of remortgaging.

Frequently Asked Questions (FAQ)

Q1: How often should I check my remortgage rate?

A1: It's advisable to review your mortgage options around 3-6 months before your current deal ends. This gives you time to compare offers and understand the market without automatically rolling onto a potentially expensive Standard Variable Rate.

Q2: What does 'remortgage fees' include?

A2: These can include arrangement fees, booking fees, valuation fees, legal fees, and sometimes even early repayment charges on your current mortgage. Always get a full breakdown from the lender.

Q3: Can I change my remaining mortgage term when remortgaging?

A3: Yes, you often can. You might choose to shorten the term to pay off the mortgage faster (increasing monthly payments) or lengthen it to reduce monthly payments (increasing total interest paid). The calculator assumes the same term for direct comparison but be aware this is adjustable.

Q4: What happens if the new interest rate is higher?

A4: If the new rate is higher, the calculator will show an increase in your monthly payment and potentially an overall increase in the total cost, even after accounting for fees. This might happen if market rates have risen significantly since you took out your current mortgage.

Q5: How do remortgage fees affect my savings?

A5: Fees increase the total amount you repay. The calculator accounts for this by adding them to the total cost of the new mortgage. If fees are high, they can reduce or even eliminate the savings from a lower interest rate over the remaining term.

Q6: Is it always better to remortgage to the lowest rate?

A6: Not necessarily. You must balance the lower rate against fees, potential changes to your mortgage term, and the lender's service. Sometimes a slightly higher rate with no fees or better product features might be more advantageous.

Q7: Can I use this calculator if my mortgage is in a different currency?

A7: This calculator is designed for Pound Sterling (£). For other currencies, you would need to perform conversions or use a calculator specific to that currency, ensuring all inputs and outputs are consistent.

Q8: What is an offset mortgage, and how does it affect remortgaging?

A8: An offset mortgage allows you to link your savings to your mortgage. You can use your savings to reduce the capital on which interest is charged, effectively lowering your mortgage payment or term. When remortgaging, ensure the new product offers similar or improved offset features if this is important to you.