Remortgage Fees and the Break-Even Point: A Worked Example
This guide is for general information only and does not provide financial advice. Check your lender’s terms before overpaying, as early repayment charges may apply. Your home may be repossessed if you do not keep up repayments on your mortgage.
Changing mortgage can involve costs, for example arrangement or valuation fees, legal fees, or an early repayment charge on the deal you are leaving. One way to look at those costs is the break-even point: how many months of lower payments it takes to cover them. The example below is an illustration; real costs and rates vary.
A worked example
Take a £200,000 balance with 25 years remaining. An example fall from 5% to 4% lowers the monthly payment from £1,169.18 to £1,055.67, a difference of £113.51 a month. The fees below are examples only. The table ignores interest on any fees added to the loan, any early repayment charge, and any difference in other terms or in how long the lower rate lasts.
| Example total costs | Months to break even |
|---|---|
| £500 | about 5 months (5 months) |
| £1,000 | about 9 months (9 months) |
| £2,000 | about 18 months (1 year 6 months) |
If you leave a deal early, an early repayment charge could add to the costs, which can move the break-even point back. See what an early repayment charge is and the early repayment charge calculator.
Questions worth asking
- What are all the costs of changing, and are any added to the loan? Costs added to the loan would usually form part of the balance and be charged interest, which the table does not include.
- How long do you expect to stay on the new deal? A shorter deal gives less time to cover the costs.
- Do the new terms differ in ways the payment alone does not show, such as overpayment limits?
Figures are estimates from this site’s calculator, using the assumptions stated above each table. The rates, fees and property values shown are examples, not figures that are available to you. They are illustrations, not forecasts. Try your own figures in the free mortgage overpayment calculator.
If you are thinking about remortgaging or overpaying, consider speaking to a regulated mortgage adviser. This page is general information, not advice on your circumstances.
Questions people ask
What does it cost to remortgage?
It varies by lender, product and circumstances, and the amounts in the table are examples only. Check the full costs of any mortgage you are considering.
Can fees be added to the mortgage?
Whether fees can be added depends on the lender and the product. If they are added to the loan, they would usually be part of the balance and be charged interest, so the total cost could be higher than the table shows.
Is the break-even point the only thing to consider?
No. It is one way to look at the cost. The rate, the term, the flexibility to overpay and your plans all matter, and you may want to speak to a regulated mortgage adviser.
Other ways to look at it
remortgaging or overpaying, what a lower mortgage rate could save, overpaying before you remortgage and loan-to-value, a shorter term or overpaying, what your payment could be when your deal ends. For how overpayments and remortgaging interact more generally, see what happens to overpayments when you remortgage and how overpayments affect your remortgage rate.