Cost to Refinance a Home Loan: Estimate the Payment

Refinancing a home loan can involve lender charges, third-party services, prepaid items, and sometimes discount points; the total depends on the loan and transaction. This calculator estimates the monthly principal-and-interest payment and total interest for a replacement loan when you enter its amount, APR, and term—it does not estimate closing costs themselves.

Formula

The fixed monthly payment is the loan amount multiplied by the monthly interest rate, divided by one minus the discount factor for all payments:

Payment = round(P × r / (1 − (1 + r)−n), 2), where r = APR / 1200 and n = years × 12.

• P is the refinanced loan principal in dollars.
• APR is the annual percentage rate entered as a percent per year.
• r is the monthly rate as a decimal.
• n is the number of monthly payments.
• Payment is the estimated monthly principal-and-interest amount in dollars, rounded to cents.

Total interest is calculated as monthly payment × number of payments − principal. Because the payment is rounded to cents first, the total uses that rounded payment. This is a simplified amortizing-loan calculation, not a quote of refinancing expenses.

Worked Example

Using the calculator’s default inputs: principal P = $20,000, APR 8%, and term 5 years.

1. Convert the APR to a monthly decimal rate: r = 8 / 1200 = 0.0066666667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Apply the payment formula: $20,000 × 0.0066666667 / (1 − (1.0066666667)−60), which rounds to $405.53 per month.
4. Calculate total interest using the rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

Assumptions

• The interest rate is fixed for the full term.
• There are equal monthly payments, made at the end of each monthly period.
• Interest compounds monthly at APR divided by 12.
• The calculation excludes refinancing fees, taxes, insurance, mortgage insurance, escrow, and any prepaid items or points. It also assumes fees are not added to the principal unless they are included in the loan amount entered.

What Home Refinance Costs Can Include

A refinance replaces an existing mortgage with a new loan. The new loan’s principal might cover the old mortgage payoff, and in some transactions may also include eligible costs or additional cash borrowed. The calculator only uses the resulting loan amount you enter; it cannot determine the payoff figure or the charges attached to a specific transaction.

Costs shown in a lender’s estimate or closing paperwork can come from several sources. Depending on the transaction, they may include lender charges, appraisal or other valuation work, title and settlement services, recording charges, prepaid interest, and deposits for taxes or insurance. Discount points, if charged, are generally an upfront amount tied to the loan terms. Which items apply, how they are calculated, and who pays them vary; obtain the itemized figures directly from the lender and relevant service providers.

Do not treat every amount due at closing as a fee. A prepaid tax or insurance deposit is different from a service charge, and an escrow deposit may be used to pay future bills. Ask for an itemized explanation that separates transaction charges from prepaid or escrow amounts.

How to Estimate the Full Cost

To understand a particular refinance, gather the new loan terms and transaction figures before comparing scenarios. The payment calculator can show how principal, APR, and term affect principal-and-interest payments, but the lender’s estimate is needed for actual charges.

1. Request an itemized estimate of charges and prepaid amounts for the proposed loan.
2. Confirm the loan amount, APR, term, payment schedule, and whether any charges are being added to the principal.
3. Use the calculator to estimate the new monthly principal-and-interest payment. Add any separately quoted monthly costs only when making a broader household budget calculation.
4. Compare the new loan’s total costs and projected payments with the remaining costs and schedule of the current mortgage. Keep upfront charges distinct from ongoing expenses.
5. Check how the estimate changes if the amount borrowed, term, or rate changes; use actual written figures rather than assuming a rate or fee.

A longer term can reduce the scheduled monthly principal-and-interest payment while extending the repayment period. It can also mean more interest over the full term, depending on the amount and rate. A lower monthly payment alone does not show whether total costs are lower, because upfront charges and the time the loan is kept also matter.

What This Calculator Does Not Measure

The “total interest” output is interest across the entire new loan under the fixed-rate assumptions. It is not the total cost of refinancing. It excludes closing charges, prepaid expenses, ongoing property costs, and the cost of interest already paid on the existing mortgage. The estimate also does not account for changing rates, missed or extra payments, or an early payoff.

For a practical comparison, calculate a break-even period only after obtaining real transaction costs and a reliable estimate of monthly savings. A simple method is to divide relevant upfront costs by the monthly difference in comparable payments, but this is only a rough comparison: it can mislead if the new term changes, costs are financed, or the homeowner keeps the loan for a different length of time. The calculator does not determine whether refinancing is suitable for an individual.

A common misconception is that “no-cost refinance” means there are no costs. The phrase may refer to costs being covered through the loan structure or offset by other terms, rather than disappearing. Read the itemization and ask how each charge is handled. Also avoid comparing a mortgage payment that includes escrow with this calculator’s principal-and-interest figure; those are different totals.

Frequently Asked Questions

How much does it cost to refinance a home loan?
There is no single amount that applies to every refinance. Charges and prepaid items depend on the loan and transaction; request an itemized estimate for the specific property and proposed terms.

Does this calculator include refinance closing costs?
No. It estimates the monthly principal-and-interest payment and total interest from the principal, APR, and term. Entering fees as part of the loan amount can show their effect on payments, but it does not identify or calculate the fees.

Are closing costs included in a refinance loan?
They may be paid at closing or, where the transaction permits, incorporated into the amount borrowed. Check the written loan estimate to see which charges are included, paid separately, or handled another way.

Does a lower refinance payment mean the loan costs less?
Not necessarily. The payment may be lower because the new loan has a longer term, while upfront charges and total interest may differ. Compare the full loan schedule and itemized transaction figures, not only the monthly payment.

What information do I need to estimate a refinance payment?
Enter the amount borrowed, annual APR, and term in years. For a complete cost comparison, also obtain the specific fees, prepaid items, existing mortgage payoff, and other figures from the lender.

This result is an estimate; 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 | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2