How to Calculate Your Remortgage Savings

The Three Numbers You Need Before Starting

Every remortgage calculator needs the same three inputs: the outstanding mortgage balance, the remaining term in years and months, and the new interest rate you are comparing. Get any of these wrong and the saving figure is meaningless. Your balance is on your latest annual statement or in online banking and will usually be a few hundred pounds lower than you think because of recent capital repayments. Your remaining term is printed on the same statement; do not confuse it with the fixed-rate period, which is typically two or five years and is a product feature rather than a loan feature.

The new rate you enter should be the rate you can realistically secure, not the headline teaser rate in a comparison table. Lenders price by loan-to-value band (60%, 75%, 80%, 85%, 90%) and most calculators quietly assume the lowest band. If your property is worth £320,000 and you owe £240,000 you are at 75% LTV, not 60%, and the rate you qualify for will be 0.20% to 0.40% higher than the headline. Check the lender's product guide or use an agreement-in-principle to get the real number.

Input	Where to find it	Common error
Outstanding balance	Annual statement or online banking	Using original loan amount instead of current balance
Remaining term	Annual statement	Confusing term with fixed-rate period
New interest rate	Lender product guide at correct LTV	Using headline rate at lowest LTV band
Product fee	Key Facts Illustration (KFI)	Ignoring fee or double-counting added-to-loan
Current rate	Mortgage offer document	Assuming SVR when still within fixed period

The Monthly Payment Formula

UK residential mortgages use the standard annuity formula: M = P × r(1+r)^n / ((1+r)^n − 1), where M is the monthly payment, P is the principal, r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments. For a £200,000 loan at 4.30% over 25 years, r = 0.043/12 = 0.003583 and n = 300, giving a monthly payment of £1,088.17. Most calculators round to the nearest pound, so you may see £1,088.

The comparison you want is old monthly payment minus new monthly payment, multiplied by twelve, to get the annual cash-flow saving. Do this before fees. You then subtract total fees (product, valuation, legal) to find the first-year net saving. If the product fee is added to the loan, the payment calculation uses the larger balance and the monthly payment rises accordingly; you do not subtract the fee afterwards because it is already being paid, with interest, through the monthly payment.

Two common shortcuts that introduce error: (1) multiplying the monthly saving by twelve and calling it "annual saving" without subtracting fees, which flatters short fixed deals with high fees; and (2) projecting the saving across the full 25-year term, which assumes the new rate holds for 25 years when you have only fixed it for two or five years. Both are used by lenders in marketing material.

Worked Example 1: The Typical Remortgagor

Sarah has a £185,000 balance on a Halifax five-year fixed at 1.84%, taken out in 2021 and ending in June 2026. Her property is worth £295,000 (LTV 62.7%, so she qualifies for the 65% LTV tier) and she has 22 years remaining. Her current monthly payment is £860. If she rolls onto Halifax SVR at 8.24%, her payment jumps to £1,477, a £617 monthly increase. Even that number understates the pain, because SVR can rise with base rate.

Instead she remortgages to Nationwide's 65% LTV two-year fixed at 4.32% with a £999 fee added to the loan. The new balance is £185,999, the new monthly payment is £1,083, and her monthly cost rises by £223 from the old fixed rate — but she saves £394 per month against SVR, or £4,728 in year one. Over the two-year fix she saves £9,456 compared with staying on SVR, net of the £999 fee and assuming SVR holds flat (which is conservative).

Scenario	Monthly payment	2-year cost	Fees	Total 2-year cost
Roll onto SVR (8.24%)	£1,477	£35,448	£0	£35,448
Nationwide 4.32% fixed	£1,083	£25,992	£999 (added)	£25,992
Halifax product transfer 4.55%	£1,108	£26,592	£0	£26,592

Worked Example 2: High Balance, High Fee

Mark has a £420,000 balance with 18 years left. His property is worth £650,000 (65% LTV) and he is on a 1.99% five-year fixed ending in September 2026. His current payment is £2,233. He has two choices: a 4.12% rate with a £1,999 fee (new payment £2,859) or a 4.48% rate with no fee (new payment £2,944). Both are five-year fixed at 65% LTV.

The low-rate option looks cheaper by £85 per month, or £5,100 over five years, and after deducting the £1,999 fee still saves £3,101. This is the right choice for Mark — but only because his balance is large. For a balance below roughly £180,000, the fee-free product would win because the £1,999 fee is not recouped by the 0.36% rate difference over five years.

The break-even balance is approximately product fee / (rate difference × years), which for Mark is £1,999 / (0.0036 × 5) = £111,056. Above that balance the low-rate deal is better; below it, the fee-free option wins. This single calculation, which most consumer calculators omit, is the most important output for anyone choosing between fee and fee-free products.

Worked Example 3: Short Remaining Term

Jean has a £68,000 balance with six years remaining on a 2.14% fixed deal that ends in April 2026. Her property is worth £240,000 (LTV 28.3%, comfortably in the 60% tier). Her current payment is £1,006. Because her loan is small and her term short, the rate difference between available products matters less than the fees. A 4.10% five-year fix with a £999 fee gives a payment of £1,067; a 4.45% fee-free product gives £1,077.

The £10 monthly difference over six years is £720, which is less than the £999 fee. Jean should take the fee-free product, even though the headline rate is 0.35% higher, because fees are not proportional to loan size. This is the opposite conclusion to Mark's case and illustrates why plugging your own numbers into the formula matters more than any "best buy" table.

There is a second factor: Jean is close to overpaying into outright ownership, and a product with a 10% annual overpayment allowance may let her clear the balance before the fixed period ends. If so, a shorter two-year fix might beat a five-year deal even at a higher headline rate, because she can exit without paying an early repayment charge at year two.

Fees: Added, Paid Up-Front, or Hidden

A typical UK remortgage has four fees: the product fee (£0 to £1,999, sometimes a percentage), the valuation fee (£0 to £350, often waived), the legal fee (£0 to £500, often covered by a free-legals package) and the admin or exit fee charged by your old lender (£50 to £300, printed on your current mortgage offer). Not all calculators include all of these, and some only show the product fee.

Adding the product fee to the loan spreads the cost over the fixed period and beyond. On a £1,999 fee at 4.30% over 25 years, you pay roughly £10.85 per month of extra payment for the full term, which is £130 per year or £3,255 over 25 years. Paying the fee up-front saves £1,256 in interest over 25 years but requires the cash up-front. For borrowers keeping the property long-term, paying up-front is the cheaper option if you have the liquidity.

APRC (Annual Percentage Rate of Charge) is supposed to bundle all of these into one number, but it assumes you stay on the lender's SVR after the fixed period ends, which almost no remortgagor does. APRC is useful for ranking products at the same lender but misleading for comparing across lenders.

What the Calculator Cannot Tell You

Remortgage calculators produce a monthly and annual saving number but cannot weigh several factors that matter just as much. First, they assume your property will value at the level you input; a down-valuation of £10,000 can push you into a higher LTV tier and a higher rate, wiping out the saving. Second, they assume you will pass affordability at the new lender, which has become stricter since 2022 rate rises and is now the most common reason remortgage applications fail.

Third, they cannot score the flexibility cost. A five-year fixed with a 5% early repayment charge locks in the rate but also locks you into a lender if you need to move, split or consolidate in year three. Fourth, they ignore the tax-adjusted offset calculation for higher-rate taxpayers with savings, for whom offset mortgages can beat conventional fixes despite a higher headline rate.

Finally, calculators do not tell you the opportunity cost of not using a broker. A whole-of-market broker can access roughly 20% more products than a direct-to-lender comparison, and the rate difference on specialist cases (self-employed, adverse credit, high LTV) often exceeds the broker fee several times over.

How to Sanity-Check Any Online Calculator

If a calculator quotes you a saving figure that seems too good, run this three-step audit. Step one: confirm the calculator is comparing to your current rate, not to SVR. Many comparison sites default to SVR because it produces a larger saving; if you are still in a fixed period or have recently remortgaged, the SVR comparison is fictional. Step two: check whether the fee is included in the saving figure. A £999 fee on a two-year saving of £3,000 cuts the net saving by a third.

Step three: verify the rate is available at your LTV. Run your balance divided by the property value and check the lender's tier. If you are at 77% LTV, the 60% LTV rate is not available to you. The FCA introduced enhanced APRC disclosure under Consumer Duty in 2023, but calculators are not regulated as financial advice and the small print often caveats the numbers into meaninglessness.

When in doubt, use two independent calculators (one lender, one broker) and compare. If the numbers diverge by more than 10%, one is making an assumption that does not apply to you. The FOS has upheld complaints where misleading calculators contributed to unsuitable advice, so regulated brokers take the arithmetic seriously even when marketing teams prefer rosier numbers.