APR Calculator for Refinance: Compare Loan Costs

An APR calculator for refinance estimates the monthly payment and total interest on a refinanced loan from its principal, annual percentage rate, and term. Enter the proposed loan amount, APR, and years; the results show the scheduled payment and interest before fees and other costs.

Formula

The calculator uses the standard fixed-payment loan formula. It converts the annual APR to a monthly rate, calculates a level monthly payment over the full term, then subtracts the original principal from all scheduled payments to estimate total interest.

• p is the refinanced loan amount, in dollars.
• apr is the annual percentage rate entered as a percentage, such as 8 for 8% per year.
• r is the monthly rate: apr ÷ 1,200.
• yrs is the loan term in years.
• n is the number of monthly payments: yrs × 12.
• pmt is the monthly principal-and-interest payment, in dollars.

In symbols, the unrounded payment is pmt = p × r ÷ [1 − (1 + r)⁻ⁿ]. The calculator rounds the displayed payment to cents. Total interest is pmt × n − p, using that rounded monthly payment. APR is entered as a yearly percentage, so dividing it by 1,200 gives the monthly rate used in this estimate.

Worked Example

Using the calculator’s default values: a $20,000 loan amount, 8% APR, and a five-year term:

1. Convert the APR to a monthly rate: 8 ÷ 1,200 = 0.0066667, or about 0.66667% per month.
2. Find the number of payments: 5 × 12 = 60.
3. Apply the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] = about $405.53 per month.
4. Calculate total interest using the displayed payment: $405.53 × 60 − $20,000 = $4,331.80.

Thus the calculator returns a monthly payment of $405.53 and estimated total interest of $4,331.80. Small differences can result if intermediate steps are rounded differently; the calculator applies its formula to the entered values and rounds the payment to cents.

Assumptions

• The APR and payment are fixed for the full term.
• Payments are made monthly, at the end of each monthly period.
• Interest accrues monthly using APR divided by 12.
• The estimate excludes refinance fees, taxes, insurance, PMI, escrow, and any other charges not included in the entered loan amount.

Using APR to Estimate a Refinance

A refinance replaces an existing loan with a new one. To estimate the new payment, use the amount that would actually be financed, not automatically the balance shown on an old statement. A payoff amount can differ from a statement balance, and a new loan may include costs added to the principal. Get the proposed amount and APR from the lender’s disclosure or quote; the calculator cannot look up those figures.

APR and the interest rate are related but not interchangeable in every loan disclosure. APR is intended to express borrowing cost as a yearly rate and may reflect certain charges, depending on the loan and how the APR is calculated. This calculator treats the entered APR as a nominal annual rate divided by 12 to estimate monthly amortization. It does not separately itemize or add fees. If a fee is financed, include it in the loan amount only when that matches the quote you are evaluating; otherwise the calculator will not capture its effect on cash paid or cost.

The term matters as much as the rate. Spreading repayment over more months generally lowers the scheduled payment but can increase total interest, because the balance remains outstanding longer. A shorter term generally raises the payment while reducing the time interest accrues. Compare the payment and total interest together, and keep the term and amount consistent with the actual offer being assessed.

What the Results Do—and Do Not—Show

The monthly payment is an estimate of principal and interest, not a complete monthly housing or debt cost. It does not include property charges, insurance, escrow contributions, or charges that are paid separately. Total interest is the interest implied by the entered amount, rate, and term across all scheduled payments. It is not the total amount of cash associated with closing or refinancing.

For a fuller comparison, account separately for costs paid upfront and costs rolled into the new balance. Also consider what happens to the existing loan: remaining payments, its payoff amount, and any costs attached to replacing it. A lower monthly payment by itself does not establish that one loan has a lower overall cost, particularly if the new term is longer. The calculator does not determine a break-even date or compare two loans automatically.

Common Mistakes and Limits

• Entering 0.08 instead of 8: APR is entered as a percentage. Enter 8 for 8%.
• Using the wrong principal: Check whether the quoted new balance includes financed fees or other amounts.
• Comparing different terms: A payment comparison is not like-for-like if the loan amounts or terms differ.
• Assuming APR includes every cost: The calculator does not know which charges are included in a particular disclosure and does not add fees separately.
• Rounding intermediate figures: Rounding the monthly rate or payment early can create small differences in the final total.

The formula assumes a fixed rate and equal monthly payments. It is not designed for adjustable rates, interest-only periods, irregular payment schedules, prepayment penalties, or changing balances. It also does not calculate closing cash, taxes, or savings versus an existing loan. Use the lender’s actual figures for those parts of a comparison.

Frequently Asked Questions

How do I calculate APR on a refinance?
Enter the proposed loan amount, APR as a percentage, and term in years. The calculator estimates a level monthly payment and total interest; it does not derive the APR from fees or cash flows.

Is refinance APR the same as the interest rate?
Not necessarily. APR is a yearly cost measure that may account for certain charges, while an interest rate describes the rate charged on the loan balance. What is included in APR depends on the loan disclosure. This calculator uses the entered APR as its rate input and does not itemize fees.

Does this calculator include refinance closing costs?
No. It excludes fees unless they are already included in the loan amount you enter. Check the lender’s disclosure for the actual costs and whether any are financed.

Why can a refinance payment be lower but total interest higher?
A longer repayment term can spread payments over more months, lowering each payment while extending the time interest accrues. Compare total interest, term, and fees as well as the monthly amount.

What loan amount should I enter?
Use the proposed refinanced principal from the quote. Confirm whether it includes the payoff balance, financed charges, or other amounts; do not assume it equals the current statement balance.

The result is an estimate, and the lender’s disclosure gives the exact figures.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2