How much could you save by remortgaging? | moneyfacts.co.uk

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MONEYFACTS ARCHIVE. This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Derin Clark

Derin Clark

Online Reporter
Published: 18/02/2021

Homeowners whose fixed rate mortgage deal has ended could potentially save hundreds of pounds each month simply by remortgaging.

Once a fixed mortgage deal ends, homeowners are usually automatically put onto the lender’s standard variable rate (SVR), which can cost borrowers significantly more each month in repayments than if they remortgaged onto a new fixed rate deal. Here we’ve looked at how much the average homeowner could save by remortgaging at a 60% loan-to-value (LTV), 75% LTV and 85% LTV.

How much could homeowners save remortgaging with 40% equity in their home?

A homeowner who owned 40% equity in their home would look for a mortgage deal at 60% LTV. The average SVR currently stands at 4.41%, while the average two year fixed rate at 60% LTV is 1.67% and the average five year fixed rate at 60% LTV is 1.90%.

Mortgage borrowers with a property valued at £250,000 looking to remortgage at a 60% LTV would be looking to borrow £150,000. Using our mortgage repayment calculator, we have calculated that if this borrower was on the average SVR on a mortgage term of 20 years, they would be paying £941.70 per month. If they remortgaged onto a two year fixed rate deal at the average rate of 1.67%, this borrower would pay £735.61 per month, a reduction of £206.09 per month. If this borrower was to remortgage on a five year fixed deal at the average rate of 1.90% they would pay £751.74 each month, a reduction of £189.96 per month in repayments.

How much could homeowners save remortgaging with 25% equity in their home?

Those who own 25% equity in their home would look for a mortgage deal at 75% LTV. The average two year fixed rate at 75% LTV currently stands at 2.29% and the average five year fixed rate at 75% LTV is 2.49%. Using the example of a property valued at £250,000, a homeowner looking to remortgage at a 75% LTV would be looking to borrow £187,500.

If the homeowner was on the average SVR of 4.41% and had a mortgage term of 20 years, the repayments on the average SVR would be £1,177.13 per month. Homeowners who remortgaged onto a two year fixed deal at 75% LTV at the average rate of 2.29% would, however, pay £974.50 per month, a reduction of £202.63 each month. Meanwhile, if the homeowner remortgaged onto a five year fixed deal at 75% LTV at the average rate of 2.49%, they would make monthly repayments of £992.65, a reduction of £184.48 each month.

How much could homeowners save remortgaging with 15% equity in their home?

Homeowners with 15% equity in their home would need a mortgage deal at 85% LTV and, on a property valued at £250,000, would be looking to borrow £212,500. The average two year fixed rate at 85% LTV is 3.03% and the average five year fixed rate on an 85% LTV deal is 3.16%.

Mortgage borrowers on the average SVR of 4.41% borrowing £212,500 on a 20-year mortgage term would have £1,334.08 in monthly repayments. If the borrower remortgaged onto the average 85% LTV two year fixed rate of 3.03%, their mortgage repayments would fall to £1,181.71, a reduction of £152.37. Remortgaging on an 85% LTV five year fixed deal at an average rate of 3.16%, their monthly repayments would be £1,195.61, a reduction of £138.47 per month.

How much could you save remortgaging?

All the above examples have used average rates on a property valued at £250,000 and on a mortgage term of 20 years to calculate how much homeowners could save remortgaging, but many deals available in our remortgage charts offer rates below the average, which means that, for some homeowners, bigger savings could be made.

Homeowners can calculate the repayment costs of a mortgage deal rate using our mortgage repayment calculator. As well as this, homeowners looking to remortgage may want to speak to a mortgage broker to discuss the best options for their circumstances.

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