Refinance Calculator
Last updated: 27 June 2026
Reviewed by Gavin Meiring, Lead research and primary author · Doctoral Candidate (Corporate Governance) · Research and drafting assisted by AI
- The general rule of thumb is that refinancing makes sense if you can reduce your interest rate by at least 1% and plan to stay in the home long enough to recoup the closing costs.
- Closing costs on a refinance typically run 2–5% of the loan amount. A mortgage of $200,000 could cost $4,000–$10,000 to refinance.
- In the US, the 2020–2021 refinancing boom was the largest in history. Millions of homeowners locked in rates below 3% — rates that may not return for a generation.
Refinance Calculator
A refinance calculator works out whether switching your mortgage to a new deal will save you money, by comparing your current costs against a new rate over your chosen term. It is used by homeowners approaching the end of a fixed-rate deal, those on a lender's standard variable rate, and anyone who wants to know if remortgaging is worth the fees and effort.
How to Use the Refinance Calculator
- Enter your outstanding mortgage balance.
- Enter your current interest rate and remaining term.
- Enter the new interest rate and term you are considering.
- Enter any fees associated with the new deal (arrangement fee, legal costs, valuation).
- Click calculate to see the monthly saving, total saving over the new term, and break-even point (how many months until savings exceed the upfront costs).
The Formula
Monthly payment at current rate:
M_current = Balance x (r_current x (1 + r_current)^n_current) / ((1 + r_current)^n_current - 1)
Monthly payment at new rate:
M_new = Balance x (r_new x (1 + r_new)^n_new) / ((1 + r_new)^n_new - 1)
Where r is the monthly rate (annual rate / 12) and n is the number of remaining payments.
Monthly saving = M_current - M_new
Break-even months = Total fees / Monthly saving
Real-World Example
Outstanding balance: £180,000. Current rate: 6.5% with 22 years remaining. New deal: 4.2% fixed for 5 years, fees of £1,500.
- Current monthly payment: approximately £1,330
- New monthly payment: approximately £1,106
- Monthly saving: £224
- Break-even: £1,500 / £224 = approximately 7 months
- Total saving over 5 years (60 months - 7 break-even): 53 months x £224 = approximately £11,870 net of fees
Refinancing makes clear financial sense here. The break-even is short and the saving is substantial.
When Refinancing Does and Does Not Make Sense
Refinancing typically makes sense when the interest rate saving is significant, fees are low relative to the monthly saving, you plan to stay in the property beyond the break-even point, and you are not locked into an early repayment charge (ERC) on your current deal. It usually does not make sense if you are close to the end of your mortgage term (the remaining balance is small), if ERCs on your current deal exceed the projected saving, if your credit situation has worsened and the new rate is not as competitive as expected, or if you plan to sell within the break-even period. Always factor in all costs, including legal fees, valuation fees, and any broker fee, before concluding that a refinance will save money.
Frequently Asked Questions
What is an early repayment charge and how much can it cost? An early repayment charge (ERC) is a fee for ending a fixed-rate or tracker mortgage before the deal period ends. It is typically expressed as a percentage of the outstanding balance, ranging from 1 to 5% depending on how early in the deal you exit. On a £200,000 mortgage with a 2% ERC, this is £4,000. Always check the ERC on your current mortgage before calculating whether refinancing makes financial sense.
Can I remortgage to release equity from my property? Yes. If your property has increased in value since you took out the original mortgage, you may be able to borrow additional funds against the increased equity when remortgaging. This is called a capital-raising remortgage. Lenders will assess affordability on the higher loan amount and the new property valuation. Interest is paid on the full new balance, so use the calculator to check the impact on your monthly payment.
How long does the remortgage process take? A straightforward remortgage with no change in loan amount typically takes 4 to 8 weeks from application to completion. Start the process 3 to 6 months before your current deal ends to avoid rolling onto the standard variable rate (SVR). Many lenders allow you to reserve a rate up to 6 months in advance with no obligation.
Should I use a mortgage broker to remortgage? A whole-of-market broker can access products not available directly to consumers and can compare hundreds of deals quickly. Some brokers charge a fee (typically £300 to £500); others are paid by the lender via commission. For a straightforward remortgage, a broker fee is often recovered many times over in a better rate. For complex situations (self-employed, adverse credit, large balance), using a broker is strongly recommended.
Working the break-even month by month
Break-even is a cash question rather than a rate question. The fee leaves your account on completion day, and the saving arrives in monthly instalments after that. The deal pays only once the instalments have covered the fee.
On the example above the saving is £224 a month and the fees are £1,500.
| Months in | Saving to date | Saving less fees |
|---|---|---|
| 1 | £224 | minus £1,276 |
| 3 | £672 | minus £828 |
| 6 | £1,344 | minus £156 |
| 7 | £1,568 | plus £68 |
| 12 | £2,688 | plus £1,188 |
| 24 | £5,376 | plus £3,876 |
| 60 | £13,440 | plus £11,940 |
The division is £1,500 by £224, which is 6.7 months, so the saving passes the fee partway through the seventh month. Across a full five years the saving totals £13,440 against £1,500 of fees, leaving £11,940. The page arrives at the same result by counting 53 whole months after break-even, which gives £11,872. Dropping the part month inside month seven accounts for the £68 difference.
The general rule is short enough to do in your head. Break-even in months is the fee divided by the monthly rate saving, and the monthly saving is the balance multiplied by the rate improvement and divided by 12. A £1,500 fee against a £60,000 balance on a deal that improves the rate by one percentage point saves £50 a month, so the break-even stretches to 30 months. The same fee on a £180,000 balance saves £150 a month and breaks even in 10 months. The fee is fixed and the saving scales with the loan, which is why the same deal suits one borrower and not another.
The two deals compared on the term the offer names
| Measure | Current rate, 6.5% | New rate, 4.2% |
|---|---|---|
| Remaining term | 22 years | 22 years |
| Monthly payment | £1,283.29 | £1,045.76 |
| Total paid over the term | £338,788.61 | £276,081.41 |
| Interest over the term | £158,788.61 | £96,081.41 |
| Fees on the new deal | none | £1,500 |
| Total cost including fees | £338,788.61 | £277,581.41 |
The saving on this reading is £237.53 a month and the total cost of the new deal is £61,207.20 lower. That is the shape the tool reports, with different payments and a different monthly saving.
The displayed pair, £1,330 against £1,106, corresponds to a remaining term nearer 20 years on both sides. On a £180,000 balance, 6.5% over 20 years and four months gives £1,330, and 4.2% over 20 years and one month gives £1,106. Two years of extra term moves the payment by £58.74 at this balance. Take the remaining term from the lender's redemption statement rather than from a round figure on the page, because the term moves the answer as much as the rate does.
What the first twelve months of the new deal pay
| Month | Payment | Interest | Capital | Balance after |
|---|---|---|---|---|
| 1 | £1,045.76 | £630.00 | £415.76 | £179,584.24 |
| 6 | £1,045.76 | £622.67 | £423.09 | £177,483.49 |
| 12 | £1,045.76 | £613.71 | £432.05 | £174,913.67 |
Interest falls as the balance falls, so the capital part of each payment grows month by month. Of the £12,549.12 paid in the first year, £7,462.79 is interest and £5,086.33 comes off the balance. That split is the reason a refinance taken early in a mortgage is worth more than the same deal taken late, and it also explains why the tool's total cost figure should be read over the whole remaining term rather than over the fixed period alone.
If the fee is added to the new balance instead of paid upfront, the payment on this balance rises by £8.71 a month over a 22-year term. The saving then becomes £215.29 rather than £224, and the break-even moves from 6.70 months to 6.97 months. Paying the fee upfront is cheaper in total, and adding it to the loan is cheaper on the day, so the choice is about cash timing rather than about the deal itself.
What this method assumes
Four assumptions sit behind every number on this page. The balance is the redemption figure the current lender would quote today, which is not the original loan and not the last statement balance. The rates stay where they are for the period being compared, so a tracker or a discount deal breaks the comparison as soon as the reference rate moves. The fees are paid on completion rather than rolled into the balance, and the early repayment charge on the current deal is a separate cost that belongs on the fee line if it applies. Nothing is overpaid, so no lender limit on overpayments is reached and no overpayment penalty is triggered.
One assumption is worth separating out. The comparison counts monthly payments and fees, and leaves out everything that does not change between the two options: buildings insurance, ground rent or service charge, and the maintenance a property needs whoever owns it. Those costs do not decide the refinance question. What does decide it is whether you will still be in the property when the new fixed period ends.
A note on the fee comparison from MoneyHelper
MoneyHelper, the guidance service run by the Money and Pensions Service, publishes a remortgage comparison on a £200,000 balance over 20 years. It sets out three options: stay on 5%, move to 4.5% with no fee, or move to 4.4% with a £2,000 arrangement fee added to the mortgage. The 4.4% deal has the lower rate, and over the full term it costs more. Total interest is £102,102 against £103,572, but the total cost including the fee is £304,102 against £303,572.
That example makes the same point as the table above in a second currency and a second loan size. Rank refinance offers on total cost, not on the headline rate, and treat any arrangement fee as part of the loan rather than as a separate purchase.
Also try these free tools related to Refinance Calculator: - Mortgage Calculator