The formula
How to calculate refinance savings
Remortgaging is worth it when the rate saving exceeds the cost of switching. Comparing both payments over the same remaining term keeps the comparison honest — extending the term reduces the payment without saving anything.
Fees include the arrangement fee, valuation, legal work if not free, and any early repayment charge on the deal you are leaving. That last one is often the deciding factor.
The calculator asks for:
- Balance outstanding
- Current rate (%)
- New rate (%)
- Years remaining (years)
- Remortgage fees
Everything recalculates as you type, and the numbers in the address bar update with it, so a link to this page carries your figures with it.
Where a figure is not immediately to hand — a precise interest rate, an exact balance — a reasonable estimate is a perfectly good starting point. Because every result updates instantly, refining a rough guess into the real figure once you have it takes a moment, and nothing about the calculation depends on getting it exactly right on the first attempt.
Why refinance savings 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.
It is also useful as a sense check before signing anything. A quote, an offer letter or a spreadsheet from someone else can contain an error, an optimistic assumption, or simply a different convention for rounding — running the same inputs through an independent calculator is a quick way to confirm a number before relying on it.
This kind of calculation rarely stands entirely alone. A refinance savings figure usually feeds into a wider decision — how it compares with a competing offer, whether it fits inside a monthly budget, what it does to a longer-term plan — and the value of having it as an exact number rather than a rough guess is that those follow-on comparisons stop being guesswork too. Once one figure in a decision is precise, it is worth making the effort to get the others precise as well, rather than mixing an exact calculation with several estimates and treating the result as equally reliable.
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
A concrete run-through, using the values already in the fields:
- Balance outstanding: 195,000
- Current rate: 6.2 %
- New rate: 4.4 %
- Years remaining: 18 years
- Remortgage fees: 1,200
That gives:
- Monthly saving: 191.89
- Saving in year one, after fees: 1,102.65
- Saving over the remaining term: 40,247.68
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
A 1.8-point rate cut on a £195,000 balance saves roughly £200 a month, so the fees are recovered inside six months. Anything recovering within a year is generally worth doing.
Where this goes wrong. Ignoring the early repayment charge. Leaving a fixed deal early typically costs 1–5% of the balance — on £195,000 that is up to £9,750, which can wipe out several years of savings.
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.
Around six months before the fixed period ends. Offers are usually valid for three to six months, so you can lock in a rate and still take a better one if rates fall before completion.
On a large balance, often yes: 0.5% on £250,000 is over £1,000 a year. On a small balance with £1,500 of fees, probably not — run the numbers rather than the percentage.
The answer it gives you is monthly saving. With 195,000 balance outstanding, 6.2 % current rate and 4.4 % new rate, that comes to 191.89. 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.