Remortgage Calculator
Use our advanced Remortgage Calculator to easily compare different remortgaging options. Understand potential savings on your monthly payments and total interest paid by inputting your current mortgage details and exploring new loan scenarios. Make informed decisions about refinancing your property with confidence.
Remortgage Comparison Tool
Your Remortgage Comparison
Monthly payments are calculated using the standard mortgage formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]. Total costs include loan amount plus all interest and fees over the term. Savings are the difference between current and new total costs.
Remortgage Analysis
| Year | Current Mortgage Payment | New Mortgage Payment | Difference |
|---|
What is a Remortgage?
A remortgage, also known as refinancing a mortgage, is the process of replacing your existing home loan with a new one. Typically, homeowners remortgage to secure a better interest rate, switch to a different lender, or to release equity from their property for other purposes like home improvements or debt consolidation. It involves paying off your current mortgage with the proceeds from a new mortgage, often on different terms.
Who Should Use a Remortgage Calculator?
Anyone considering changing their current mortgage deal should use a remortgage calculator. This includes homeowners looking to:
- Reduce their monthly mortgage payments by securing a lower interest rate.
- Shorten their mortgage term to become debt-free sooner.
- Borrow additional funds (release equity) against their property.
- Switch from a variable or tracker rate to a fixed rate for payment stability, or vice versa.
- Move from a lender's standard variable rate (SVR) to a more competitive product.
Common Misconceptions About Remortgaging
A common misconception is that remortgaging is only beneficial when interest rates fall. However, you can often save money even if rates haven't changed significantly, simply by switching to a lender with better product offerings or by adjusting your loan term. Another myth is that remortgaging is overly complex and expensive; while there are fees involved, the potential savings can far outweigh these costs, especially with the advent of online comparison tools and streamlined application processes.
Remortgage Formula and Mathematical Explanation
The core of remortgage calculations revolves around determining the monthly payment (P&I – Principal and Interest) for both the current and the proposed new mortgage. The standard formula used is the annuity mortgage formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- M = Monthly Payment
- P = Principal Loan Amount
- i = Monthly Interest Rate (Annual Rate / 12)
- n = Total Number of Payments (Loan Term in Years * 12)
To calculate potential savings, we first determine the monthly payment (M) for both scenarios (current and new mortgage). Then, we calculate the total cost over the respective terms:
Total Cost = (Monthly Payment * Number of Payments) + Total Fees
The savings are then the difference between the Total Cost of the current mortgage and the Total Cost of the new mortgage. This calculation provides a clear financial picture of the remortgage proposition.
Variables Table
| Variable | Meaning | Unit | Typical Range |
|---|---|---|---|
| P (Principal Loan Amount) | The total amount borrowed for the mortgage. | £ | £10,000 – £1,000,000+ |
| i (Monthly Interest Rate) | The cost of borrowing, expressed as a monthly fraction. | Decimal (e.g., 0.03 / 12 for 3% annual) | 0.001 – 0.02+ |
| n (Number of Payments) | The total number of monthly payments over the loan term. | Number (e.g., 240 for 20 years) | 60 – 420+ |
| M (Monthly Payment) | The fixed amount paid each month towards the loan. | £ | Varies based on P, i, n |
| Fees | Costs associated with setting up the new mortgage. | £ | £0 – £5,000+ |
Practical Examples (Real-World Use Cases)
Example 1: Seeking Lower Monthly Payments
Scenario: Sarah has £180,000 remaining on her mortgage with 22 years left. Her current interest rate is 5.2%, resulting in a monthly payment of £1,140. She finds a new deal with a 4.0% interest rate over the same remaining term (22 years), with £1,500 in fees.
Inputs:
- Current Loan Amount: £180,000
- Current Interest Rate: 5.2%
- Current Term Remaining: 22 years
- New Loan Amount: £180,000
- New Interest Rate: 4.0%
- New Term (Years): 22
- New Mortgage Fees: £1,500
Calculation:
- Current Monthly Payment: £1,140 (approx.)
- New Monthly Payment: £1,035 (approx.)
- Monthly Savings: £105
- Total Current Cost (22 years): (£1,140 * 264) = £299,960
- Total New Cost (incl. fees): (£1,035 * 264) + £1,500 = £273,390 + £1,500 = £274,890
- Total Savings: £299,960 – £274,890 = £25,070
Result: By remortgaging, Sarah can reduce her monthly payments by £105 and save approximately £25,070 over the remaining 22 years, despite the £1,500 fee.
Example 2: Releasing Equity for Home Improvements
Scenario: David owes £120,000 on his mortgage with 15 years left at 4.8%. He wants to remortgage to borrow an extra £30,000 for a kitchen renovation, bringing the total loan to £150,000. The new deal is for 25 years at 4.2%, with £2,000 in fees.
Inputs:
- Current Loan Amount: £120,000
- Current Interest Rate: 4.8%
- Current Term Remaining: 15 years
- New Loan Amount: £150,000
- New Interest Rate: 4.2%
- New Term (Years): 25
- New Mortgage Fees: £2,000
Calculation:
- Current Monthly Payment: £958 (approx.)
- New Monthly Payment: £882 (approx.)
- Monthly Payment Increase (due to term): -£76 (Lower due to lower rate & longer term offset)
- Total Current Cost (15 years): £958 * 180 = £172,440
- Total New Cost (incl. fees): £882 * 300 + £2,000 = £264,600 + £2,000 = £266,600
- Net Cost of Equity Release: £266,600 – £172,440 = £94,160 (This is the total cost of the £30,000 borrowed over 25 years plus fees, assuming the original £120k would have been paid off).
Result: David can access £30,000 for renovations. While his monthly payment decreases slightly to £882, his total repayment period increases significantly. The cost of borrowing the extra £30,000 over 25 years, including fees, is substantial, highlighting the trade-off between accessing funds and the long-term cost.
How to Use This Remortgage Calculator
- Enter Current Mortgage Details: Input your outstanding loan balance, current interest rate, and the remaining years on your mortgage.
- Enter New Mortgage Offer Details: Input the loan amount you wish to borrow (usually the same as your current balance, unless releasing equity), the proposed new interest rate, the desired new loan term in years, and any associated fees for the new mortgage.
- Review Calculations: Click 'Calculate Remortgage'. The tool will display the primary result: the total potential savings.
- Examine Intermediate Values: Check the calculated new monthly payment, the monthly difference, and the total interest saved.
- Analyze the Schedule & Chart: Review the year-by-year payment comparison table and the dynamic chart to visualize the impact of remortgaging over time.
Interpreting Results
A positive 'Total Cost Savings' figure indicates that remortgaging to the new deal would save you money over the new loan term. A negative figure suggests the new deal, including fees, would cost more. The 'Monthly Payment Difference' shows immediate savings or increases in your outgoing payments. The chart helps visualize cumulative savings or costs.
Decision-Making Guidance
Use the calculator to compare multiple potential remortgage offers. Always consider factors beyond just the interest rate, such as fees, early repayment charges, and the loan term. If the monthly savings are significant and outweigh the fees, remortgaging is likely a good option. If you're releasing equity, ensure the purpose justifies the increased borrowing costs.
Key Factors That Affect Remortgage Results
- Interest Rate Differential: The difference between your current and the new interest rate is the most significant factor. A lower new rate directly translates to lower monthly payments and overall interest paid.
- Loan Term: Extending the loan term (e.g., from 15 to 25 years) typically lowers monthly payments but increases the total interest paid over the life of the loan. Conversely, shortening the term raises monthly payments but reduces total interest.
- Mortgage Fees: Arrangement fees, valuation fees, legal costs, and other charges associated with the new mortgage must be factored in. High fees can negate savings from a lower interest rate, especially on shorter repayment periods.
- Loan-to-Value (LTV) Ratio: Lenders assess risk based on the LTV. A lower LTV (meaning you owe less relative to the property value) usually grants access to better interest rates. Remortgaging can change your LTV.
- Remaining Balance vs. New Loan Amount: If you plan to borrow more equity, the new loan amount increases, impacting both monthly payments and total interest. If you overpay on your current mortgage before remortgaging, the new loan amount could be lower.
- Market Conditions & Lender Criteria: Interest rates fluctuate based on economic factors (like Bank of England base rate changes). Lenders also have specific criteria for who they lend to, which can affect available rates and products.
- Calculation Assumptions: This calculator assumes a consistent interest rate for the entire term (for fixed-rate or like-for-like calculations) and no further overpayments or underpayments beyond the initial setup. Variable rates and unexpected life events can alter outcomes.
Frequently Asked Questions (FAQ)
- Q: How often should I consider remortgaging? A: It's generally advisable to review your mortgage every 2-5 years, especially when your current fixed or introductory deal ends. Compare offers then to ensure you're on the best possible rate.
- Q: What are early repayment charges (ERCs)? A: ERCs are penalties charged by your current lender if you pay off your mortgage early, typically within the first few years or during a fixed-rate period. These must be factored into your remortgage cost calculation.
- Q: Can I remortgage if I have poor credit? A: It can be more challenging, but not impossible. Specialist lenders may offer options, often at higher interest rates. Improving your credit score beforehand is advisable.
- Q: What is the difference between remortgaging and a further advance? A: Remortgaging involves switching lenders or replacing your entire mortgage. A further advance is borrowing more money from your *existing* lender, usually secured against the same property.
- Q: How do I calculate the total cost of my mortgage? A: Total cost is the sum of all monthly payments over the loan term plus any fees and charges incurred. This calculator helps compare the total cost of your current vs. potential new mortgage.
- Q: Does the calculator account for broker fees? A: This specific calculator includes fields for 'New Mortgage Fees'. You should add any broker fees you might incur to this amount for a comprehensive total cost.
- Q: What happens if interest rates go up after I remortgage? A: If you remortgage onto a new fixed-rate deal, your payments are protected from rate rises for the fixed period. If you choose a variable rate, your payments could increase.
- Q: Can I use remortgaging to pay off other debts? A: Yes, this is known as equity release or debt consolidation. You borrow more against your home to clear other loans. However, it extends your mortgage term and shifts unsecured debt to secured debt, potentially increasing overall interest paid.