Mortgages

Remortgage calculator

Enter the balance outstanding, the instalments left and the two rates: you get the new instalment, the monthly and total saving, and the comparison on the same term — the only honest one when the new offer stretches the finish date.

When switching is worth it

Remortgaging moves the loan to another lender, leaving the outstanding balance and the security as they are: what changes is the rate and, if you want, the term. In some countries — Italy since 2007, for one — the switch is free by law, with the incoming lender paying the valuation, the paperwork and the deed, and no penalty from the lender you leave. Where that holds, the comparison is unusually clean: the present rate on one side, the offered one on the other, with nothing dragging.

The comparison has to be made on the same term, and that is where it usually goes wrong. An offer that stretches the finish date shows a lower instalment, and that lower instalment is not a saving: it is the same debt spread over more years, which normally costs more interest in total. So alongside the saving on the offer as it stands, this calculator always reports what you would get keeping the present term.

What remains is how much is left to run. The gain from switching accumulates instalment by instalment, so it is worth a great deal with fifteen years to go and little with three. And because a French schedule concentrates the interest in the early years, switching early is worth far more than switching late for the same difference in rate.

Common mistakes

Comparing instalments without looking at the terms. A lower instalment over a longer term says nothing about the saving: compare the total interest, or the instalments on the same term.
Using the original amount instead of the outstanding balance. Remortgaging moves what is still owed, not what was borrowed at the start: starting from the original amount inflates every figure.
Switching for a tiny difference in rate with few instalments left. The gain builds over time: with three years to run and half a point of difference, the saving is often trivial next to the work of applying again.

Frequently asked questions

What does remortgaging cost?

It depends where you are. In Italy nothing at all for the borrower: since 2007 the valuation, arrangement and notarial costs fall on the incoming lender and the outgoing one may charge no penalty. Elsewhere there are usually fees — enter them here to see how many instalments it takes to earn them back.

Can the term be extended when switching?

Yes, the new lender may offer a different term. But a lower instalment obtained by stretching is not a saving: it generally costs more interest in total. You will always find the same-term comparison here too, which isolates the effect of the rate alone.

Can you switch from variable to fixed?

Yes, and it is one of the commonest reasons for switching: from a variable rate to a fixed one, or the other way round. Enter the fixed rate offered as the new rate and compare the total interest.

Is half a point of difference worth switching for?

It depends how much is left to run. Over fifteen years on a sizeable balance, half a point is worth thousands; over three years it is worth little. Look at the saving on the same term, not at the gap between the rates.

How this calculation works

Present instalment: R = D·i/(1 − (1+i)^−n), with D the outstanding balance, n the instalments left and i the present period rate. New instalment: the same formula at the new rate and, if given, a new number of instalments. Total interest on each side: instalment times the number of instalments, less the balance. Monthly saving: the difference between the two instalments. Saving on the same term: the new offer recomputed over the instalments that were left, so the difference depends on the rate alone and not on the stretching. Break-even: costs divided by the monthly saving, rounded up; if the new instalment is not lower there is no break-even point, and that is said rather than computed. Net saving: the interest saved less the cost of switching.

Mortgage payment

What you will pay each month, and what it costs in total.

Variable-rate mortgage

Stress-test the instalment against a rising index.

Early repayment

What paying a lump sum off the capital is worth.

Installment comparison

Comparison table: how the instalment changes as you borrow less or shorten the mortgage term.