The formula
How to calculate refinance break even
The break-even point is the month at which the accumulated saving from a remortgage finally covers what the switch cost. Past that point you are ahead; before it, you would have been better off staying.
Include every cost: arrangement fee, valuation, legal fees, broker fee and any early repayment charge. The ERC is the one that most often turns an obvious switch into a bad one.
The calculator asks for:
- Monthly saving from the new rate
- Remortgage fees
- Early repayment charge
The result updates on every keystroke. The URL updates too, which makes the filled-in version easy to bookmark or send to someone else.
The order the fields are filled in makes no difference to the result — the calculator recomputes the whole formula from whatever is currently in every field, not step by step. That means it is safe to adjust one number, watch the result change, and adjust it back, without worrying about resetting anything first.
Why refinance break even matters
A calculation like this usually gets used at a decision point rather than out of curiosity — comparing two real options, checking a number a lender or adviser has quoted, or working out whether a plan that sounded fine in conversation still holds up once it is written down with actual figures. The maths itself is rarely complicated; what is hard is remembering which figures to use and in what order, which is exactly what a dedicated calculator is for.
Beyond a one-off check, the same calculation is worth revisiting whenever the underlying numbers change — a new interest rate, a change in income, a different term. Because the figures live in the page's own web address, coming back to update just one field and compare the new result against the old one takes seconds rather than starting again from a blank page.
It is also worth being clear about what a single figure like this can and cannot settle on its own. It answers the specific question the formula was built to answer, and nothing more — a favourable refinance break even result does not automatically mean a decision is a good one overall, since plenty of other factors that a formula cannot capture, from personal circumstances to how comfortable a commitment feels, usually matter just as much as the arithmetic. Use the number as one solid input among several rather than the whole of the decision.
In practice, most people arrive at a page like this one having already tried a version of the calculation by hand or in a spreadsheet, and use the calculator here to confirm it rather than replace it. That is a reasonable way to use it — the two should agree to the last decimal place if the same inputs and the same formula are used, and if they do not, the formula shown above is the one to check your own working against first.
Worked example
Here is the calculation with the starting values:
- Monthly saving from the new rate: 185
- Remortgage fees: 1,200
- Early repayment charge: 0
That gives:
- Break-even: 6.5 months
- Break-even: 0.5 years
- Total cost of switching: 1,200
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
Reading the result
Compare the break-even against the length of the new fixed period. Breaking even in month seven of a 60-month fix is excellent; breaking even in month 40 leaves very little upside for the risk.
Where this goes wrong. Fees added to the loan rather than paid up front change the calculation, because you then pay interest on them for the rest of the term. Treat that as a slightly larger cost, not a free one.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
Probably not, unless the break-even is very short. Moving usually means paying the new deal's early repayment charge, and porting a mortgage is not always possible on the terms you expect.
Not directly. A lower rate also means slightly more of each payment goes to capital, so the true benefit is a little better than the payment difference suggests.
It returns break-even. With 185 monthly saving from the new rate, 1,200 remortgage fees and 0 early repayment charge, that comes to 6.5 months. Change any field and the figure moves with it.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.