How Much Does Refinance Cost? Calculate the New Payment

Refinancing costs depend on the loan, lender, and any fees added to the new balance; there is no single universal price. This calculator estimates a refinanced loan’s monthly payment and total interest from its balance, APR, and term—it does not calculate closing costs or the amount needed to pay off the old loan.

Formula

The calculator uses the standard fixed-payment loan formula. It estimates the payment from the loan principal, monthly interest rate, and number of monthly payments:

Payment = P × r ÷ [1 − (1 + r)−n]

• P is the new loan amount, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 1,200.
• n is the term in months: years × 12.
• Payment is the estimated monthly principal-and-interest payment, in dollars.

Total interest is estimated as monthly payment × number of payments − principal. The displayed payment is rounded to cents, and the total uses that rounded monthly amount. This is an estimate of loan arithmetic, not a quote for a refinance.

Worked Example

Using the calculator’s default inputs—$20,000, 8% APR, and five years:

1. Convert the APR to a monthly decimal rate: r = 8 ÷ 1,200 = 0.0066667.
2. Convert the term to months: n = 5 × 12 = 60.
3. Substitute into the payment formula: 20,000 × 0.0066667 ÷ [1 − (1.0066667)−60] ≈ $405.53 per month.
4. Calculate interest using the displayed payment: $405.53 × 60 − $20,000 = $4,331.80.

The outputs are therefore a monthly payment of $405.53 and estimated total interest of $4,331.80. They do not represent the full cost of refinancing because fees and other charges are not included.

Assumptions

• The loan has a fixed APR and equal monthly payments.
• Payments are made at the end of each monthly period.
• Interest compounds monthly at APR ÷ 12.
• The calculation excludes lender and third-party fees, taxes, insurance, PMI, escrow, and any charges from paying off the existing loan.

What Refinancing Costs Include

A refinance replaces an existing loan with a new one. Its total cost can include charges for originating or processing the new loan, valuation or inspection work, title or recording services, and other transaction-specific items. Which charges apply—and their amounts—depend on the loan and transaction. Obtain an itemized estimate from the lender and relevant service providers rather than assuming a standard fee.

Also distinguish fees from prepaid or escrow amounts. A transaction may require money collected in advance for items such as property-related bills or insurance, or funds deposited into an escrow account. These affect the cash needed at closing but are not necessarily the same as a lender fee. The existing escrow balance, if any, is another separate item to ask about; it should not automatically be treated as money lost or as a discount on the new loan.

How to Estimate the Full Cost

To estimate the out-of-pocket cost, total the charges and required prepaid amounts shown in the lender’s written estimate, then account separately for any credits or funds being returned. Ask the lender to identify which figures are estimates, which are fixed, and what circumstances could change them. Do not add every line item to the new principal unless the loan documents show that it is being financed.

For a simple illustration, suppose a lender’s estimate lists $3,000 in costs paid at closing. That figure would be the estimated cash expense before considering any applicable credits, refunds, or other transaction details. If the same $3,000 were instead added to a $20,000 new balance, the calculator’s principal input would be $23,000, and the payment and interest estimates would rise. This example is arithmetic only; it does not imply that a lender will offer either arrangement.

For a more complete comparison, collect the payoff amount for the current loan, the proposed new loan amount, the itemized costs, and the written APR and term for the new loan. The old loan’s payoff figure may differ from the balance shown on a recent statement because it is calculated for a particular date and may include accrued interest or other contract-specific amounts. Ask the current servicer for a payoff quote rather than assuming the statement balance is exact.

Cash Costs, Rolled-In Fees, and Break-Even

“No-cost refinance” can be misleading: it may mean that certain charges are covered through lender credits or reflected in the loan’s pricing, rather than that the transaction has no economic cost. Check the written terms to see whether charges are paid upfront, offset by credits, or added to the principal. Financing fees means borrowing more, which can increase interest over time.

A break-even estimate is sometimes used to describe how long it takes for a lower monthly payment to offset upfront costs. A basic calculation is upfront costs ÷ monthly payment reduction. For example, $3,000 in upfront costs divided by a $100 monthly reduction gives 30 months. This is a simplified comparison, not a complete measure: it leaves out differences in loan terms, interest over the full repayment period, future plans, and the effect of borrowing fees. A lower payment alone does not establish that the refinance costs less overall.

Using the Calculator and Its Limits

Enter the proposed loan’s principal, APR, and term—not the amount you originally borrowed or the monthly payment on your current loan. If fees are being financed, include them in the principal only when the proposed loan documents show they are part of the balance. Use the APR and term supplied for the actual offer; do not treat the example defaults as a market quote.

The result covers principal and interest under a fixed-rate, level-payment model. It does not account for a variable rate, irregular payment timing, a balloon payment, extra payments, a changing balance, or fees. It also does not calculate cash due at closing, savings versus an existing loan, or whether a refinance is suitable for a particular person. To compare loans, use their written terms and itemized disclosures, and compare both the amount paid upfront and the total scheduled payments over the relevant period.

Frequently Asked Questions

How much does it cost to refinance a loan?
It varies by transaction and loan terms. Review an itemized estimate for charges, prepaid amounts, and credits; the calculator here estimates payment and interest, not refinance fees.

Can refinance costs be added to the loan?
Some proposed loans may include eligible costs in the principal, but the offer’s documents determine what is included. A larger principal generally means more interest under the same APR and term.

Does a no-cost refinance mean there are no fees?
Not necessarily. “No cost” may refer to how charges are offset or priced. Check the written estimate and loan terms to see who pays each charge and whether it affects the balance or pricing.

Does refinancing lower the total amount I pay?
Not automatically. A lower monthly payment can result from a longer repayment term, and fees or a different APR can affect total interest. Compare the full scheduled payments and transaction costs, not just the monthly amount.

What loan amount should I enter?
Enter the proposed new principal. Use the lender’s figures to determine whether payoff amounts or financed fees are included; do not assume the old statement balance equals the payoff amount.

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

Related

• Loan-to-Value Ratio: Why Lenders Use LTV
• Loan-to-Value Ratio for Refinance: Formula and Calculator
• Total Loan-to-Value Ratio: What Makes It Increase?

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