Why compare by true cost, not monthly payment
Lenders compete on headline rates, but the cheapest rate isn’t always the cheapest deal. A complete comparison over the period you’ll keep the deal needs:
- Monthly payments over the comparison period
- Upfront costs: product (arrangement) fee, legal and valuation fees, and any early repayment charge on your current deal
- Cashback, which reduces your cost
- The balance you still owe at the end, because a deal that repays less capital isn’t really cheaper
The calculator adds all of these up for staying put and for each deal, and charts the cumulative cost month by month. Where a deal’s line drops below the stay line is its break-even month.
Worked example: £200,000 balance, 20 years left
You’re about to come off a fix onto a 7.25% SVR. Two 2-year deals are on offer:
| Option | Monthly payment | Upfront | True cost over 2 years |
|---|---|---|---|
| Stay on SVR (7.25%) | £1,580.75 | £0 | £228,351 |
| Deal A: 4.50%, £999 fee | £1,265.30 | £999 | £218,451 |
| Deal B: 4.75%, no fee, £250 cashback | £1,292.45 | £0 | £218,187 |
Both deals are thousands cheaper than staying on the SVR. Deal A breaks even in month 3. Over two years it comes out behind Deal B by £264. On a smaller balance the result often flips in favour of the no-fee deal.
Lower payment, higher cost
The calculator warns you when a deal has a lower monthly payment but a higher true cost than staying put. This usually happens when a large fee is added to the loan, or when the term is extended. Lower monthly outgoings can be the right call, but it should be a deliberate choice, not a side effect of a fee.
Early repayment charges
If you’re leaving a fixed deal early, your lender may charge 1–5% of the balance. Enter it as Early repayment charge. It’s added to the upfront cost of every new deal, because you’d pay it whichever deal you switch to. It often only makes sense to leave early if rates have fallen a long way or you’re moving home anyway.
What happens after the fixed period
Each deal reverts to the rate you set under Rate after the fix when its fixed period ends. To compare a 2-year and a 5-year fix fairly, set the comparison period to match, or to the length of time you’re confident you’ll keep the mortgage. Comparing a 2-year deal over 5 years assumes you’d sit on the SVR for the last three years, which most people wouldn’t.
Remortgage checklist
- Find your current balance, rate, deal end date and ERC on your annual statement.
- Check your loan-to-value. A lower band (60%, 75%) can unlock cheaper rates.
- Get your lender’s product-transfer offers as a benchmark.
- Compare whole-of-market deals directly or through a broker.
- Run the numbers here, then lock in a rate up to six months ahead.
Frequently asked questions
Is a lower rate with a big fee worth it?
It depends on your loan size and how long you keep the deal. A £999 fee is easily worth it on a £250,000 mortgage, but on £60,000 a fee-free deal at a slightly higher rate is often cheaper. The calculator's true cost answers this for your numbers.
Should I add the product fee to my mortgage?
Adding it avoids paying upfront, but you pay interest on it for the whole term. Over 25 years at 5%, adding a £999 fee costs roughly £750 in extra interest. Pay it upfront if you can.
When should I start looking to remortgage?
Around six months before your fixed rate ends. Most lenders let you lock in a new rate up to six months ahead, and you can usually switch to a better deal if rates fall before completion.
What's the difference between a remortgage and a product transfer?
A product transfer is a new deal with your existing lender — quick, no legal work and often no new affordability check. A remortgage moves to a new lender, which can offer better rates or cashback but takes longer and needs legal work (often free).
What counts in the 'true cost'?
Everything you pay up to the end of the comparison period — monthly payments, product fees, legal and valuation costs and any early repayment charge — minus cashback, plus the balance you still owe at the end. Comparing the remaining balance stops a deal with lower payments looking cheaper just because you've repaid less.
Does remortgaging affect my credit score?
A new lender will run a hard search, which has a small, temporary effect. Product transfers usually don’t.
Sources
Results are estimates for education and planning, not financial advice. They depend on the figures you enter and the assumptions shown above.