Home Loan Refinance Calculator and Payment Changes

A home loan refinance replaces an existing mortgage with a new loan; this calculator estimates the new loan’s monthly principal-and-interest payment and total interest from its amount, APR, and term. Enter the proposed loan details to see those figures; compare them with your current loan and any costs separately, because this calculator does not determine whether refinancing is suitable for you.

Formula

The calculator uses the standard fixed-rate, fully amortizing loan payment formula. It divides the loan amount multiplied by the monthly interest rate by one minus the growth factor raised to the negative number of monthly payments:

Payment = P × r ÷ [1 − (1 + r)⁻ⁿ]

• P is the proposed new loan amount, in dollars.
• r is the monthly interest rate as a decimal: annual APR ÷ 12 ÷ 100.
• n is the term in months: years × 12.
• Payment is monthly principal and interest, in dollars.

Total interest is calculated as the monthly payment multiplied by the number of payments, minus the original loan amount. The payment is rounded to cents before this total is calculated, so the displayed total uses the rounded monthly payment. The calculation assumes equal monthly payments and a constant rate.

Worked Example

Using the defaults—$200,000, 6.5% APR, and 30 years—first convert the inputs:

• Monthly rate: 6.5 ÷ 1,200 = 0.0054166667.
• Number of payments: 30 × 12 = 360.
• Payment: 200,000 × 0.0054166667 ÷ [1 − (1 + 0.0054166667)⁻³⁶⁰] = $1,264.14 per month, rounded to cents.
• Total interest: $1,264.14 × 360 − $200,000 = $255,090.40.

These are estimates for the entered loan terms, not a refinancing quote. The principal-and-interest payment does not represent a complete monthly housing payment.

What Refinancing Changes

In a refinance, a borrower takes out a new mortgage and uses it to pay off the existing mortgage. The new loan may have a different balance, interest rate, term, or payment structure. The old loan’s remaining balance—not necessarily the amount originally borrowed—is generally the starting point for estimating a replacement loan. A proposed amount can also reflect costs added to the loan or cash taken out, if applicable to the transaction.

A lower monthly payment does not automatically mean lower borrowing costs. For example, extending repayment over more years can reduce the scheduled payment while increasing the time interest accrues. Conversely, shortening the term may raise the monthly payment even when the total repayment period is reduced. This calculator shows the new loan’s payment and interest total; it does not calculate the difference from the current loan unless you separately calculate both loans using their respective balances, rates, and remaining terms.

How to Compare a Refinance

For a useful comparison, collect figures for both the existing mortgage and the proposed replacement. Ask the lender for the proposed loan amount, APR, term, payment schedule, and itemized costs. Use the current loan’s remaining principal and remaining term when estimating its future payments, rather than its original balance or original term.

1. Calculate the proposed loan’s principal-and-interest payment and total interest.
2. Calculate the current mortgage’s remaining scheduled payments using its current balance, rate, and remaining term.
3. Identify transaction costs and any amounts added to the new balance. The calculator does not include them automatically.
4. Compare payments over the same period and consider how long you expect to keep the loan. A full-term interest total assumes every scheduled payment is made through the end of that term.
5. Check the lender’s written disclosures for the exact payment, costs, and loan terms before relying on an estimate.

These calculations describe cash flows, not a recommendation. Individual circumstances and loan documents matter, and this page does not assess eligibility, tax consequences, or whether a particular transaction is appropriate.

Costs and What the Calculator Leaves Out

A refinance can involve charges, but the exact costs depend on the proposed transaction and must be obtained from the lender. Do not assume that a cost is absent because it is not represented in the calculator. If charges are paid upfront, they affect cash needed at closing; if included in the new principal, they increase the amount on which interest is calculated. Cash-out proceeds likewise increase borrowing when they are added to the loan.

The output covers principal and interest only. It excludes lender or other transaction fees, property taxes, homeowners insurance, mortgage insurance, escrow deposits, and any other housing expenses. It also does not model adjustable rates, irregular payment dates, skipped or extra payments, prepayment charges, or changes in the amount owed over time. The APR entered should be the figure supplied for the proposed loan; the calculator cannot establish it from a quoted nominal rate or account for how a lender presents costs.

Common Misunderstandings and Limits

• Payment is not the same as total housing cost. Taxes, insurance, and other expenses can make the amount paid each month higher than the displayed result.
• A smaller payment is not necessarily a smaller total cost. A longer term can spread payments out and increase total interest.
• The displayed interest is not a refinance savings figure. It is the estimated interest on the new loan over its full entered term, not the difference between old and new financing.
• Rounding affects totals. The calculation rounds the monthly payment to cents and multiplies that displayed payment by the number of months; a lender may use more detailed calculations and a final payment adjustment.

Use the calculator for a consistent mathematical estimate, then compare it with complete loan documents. It cannot predict approval, set an APR, or account for every contract-specific feature.

Assumptions

• The interest rate is fixed for the entire entered term.
• Payments are equal monthly payments, made at the end of each monthly period.
• Interest compounds monthly at APR ÷ 12; the APR is entered as a percentage per year.
• Fees, taxes, insurance, mortgage insurance, escrow, and other costs are not included.

Frequently Asked Questions

What does it mean to refinance a home loan?
It means replacing an existing mortgage with a new loan that pays off the old one. The replacement loan has its own amount, rate, term, and payment conditions.

Does refinancing always lower the monthly payment?
No. The payment depends on the new balance, APR, and term. A shorter term or larger balance can result in a higher payment, and a longer term can lower a payment while extending repayment.

Does this calculator include refinance closing costs?
No. Enter the proposed principal and loan terms to estimate principal and interest. Obtain actual costs from the lender and account for whether they are paid upfront or included in the loan amount.

Why can total interest rise when a payment falls?
A longer repayment term generally means more monthly periods in which interest can accrue. A lower payment alone does not show the total cost of repaying a loan.

Can I use the calculator to find my refinance savings?
Not by itself. Calculate the current loan’s remaining payments and interest separately, then compare them with the proposed loan over a matching time period while accounting for costs. The results remain estimates.

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

Related

• Reducing Balance Loan Calculator and Formula
• Outstanding Loan Balance Calculator: Estimate What Remains
• Personal Loan Balance Transfer Calculator and Guide

in p | New loan amount | $ | 200000 | 1 | 100000000
in apr | Interest rate (APR) | % | 6.5 | 0.01 | 100
in yrs | Loan term | years | 30 | 0.0833 | 50
out pmt | Monthly principal-and-interest payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest over the term | $ | pmt * yrs * 12 - p | 2