Interest Rate Refinance Calculator: Compare Payments

An interest rate refinance calculator estimates a new loan’s monthly payment and total interest from its balance, annual percentage rate (APR), and term. Enter the proposed loan amount, rate, and term to see the payment and interest under a fixed-rate, monthly-payment model; compare those estimates with your current loan separately.

Formula

The calculator uses the standard amortizing-loan payment formula. It assumes equal monthly payments and a fixed APR throughout the term:

Monthly payment = round[P × r ÷ (1 − (1 + r)⁻ⁿ), 2], where r = APR ÷ 1,200 and n = years × 12.

• P is the new loan principal in dollars.
• APR is the annual percentage rate entered as a percentage, such as 6.5 for 6.5% per year.
• r is the monthly rate as a decimal.
• n is the number of monthly payments.
• Total interest = monthly payment × n − P. It uses the monthly payment rounded to cents, so it is an estimate of interest over the full schedule.

The APR is divided by 12 to approximate a monthly rate. The result is not a complete refinance comparison: it calculates the proposed loan’s payment and interest, not the savings or break-even point against an existing loan. The new balance should reflect the amount actually financed, including any costs rolled into the loan if applicable.

Worked Example

Using the calculator’s defaults: a $200,000 loan, 6.5% APR, and a 30-year term.

1. Convert the APR to a monthly decimal rate: 6.5 ÷ 1,200 = 0.0054166667.
2. Calculate the number of payments: 30 × 12 = 360.
3. Substitute into the payment formula: $200,000 × 0.0054166667 ÷ [1 − (1.0054166667)⁻³⁶⁰] ≈ $1,264.14 per month, rounded to cents.
4. Calculate estimated total interest using the rounded payment: $1,264.14 × 360 − $200,000 = $255,090.40.

Assumptions

• The APR and payment amount remain fixed for the full term.
• Payments are made monthly; the formula does not model irregular payment dates.
• Interest is approximated with monthly compounding at APR ÷ 12.
• Fees, taxes, insurance, mortgage insurance, escrow, and other charges are not included unless they are already reflected in the amount entered as the new loan principal.
• The payment is rounded to the nearest cent, and total interest multiplies that rounded payment by the number of months. Actual final payments can differ because of lender rounding and servicing conventions.

When to Use a Refinance Calculator

Use this estimate to understand how a proposed principal, APR, or term affects the scheduled payment and the interest implied by that loan. It can help isolate the effect of changing one input at a time. For example, a longer term generally spreads repayment over more months and can lower the scheduled payment, while increasing the number of months over which interest accrues. A shorter term has fewer scheduled payments, but its monthly payment may be higher.

To assess a refinance against your current loan, collect comparable figures for both loans. The current balance—not necessarily the original amount borrowed—is the starting point for a new payoff. Compare payment, remaining time, and estimated interest, then account separately for any lender-provided costs, credits, or other charges. Ask for the proposed loan’s written disclosures or payoff figures; the calculator does not determine them.

• Use the proposed amount financed as the loan amount, not automatically the home’s value or the original loan amount.
• Enter APR as a percentage number: enter 6.5 for 6.5%, not 0.065.
• Use the proposed term in years. A 15-year term is entered as 15, not 180.
• Run separate estimates for different offers or terms rather than combining different assumptions in one result.

Reading Results and Common Mistakes

The monthly payment shown is principal and interest under the formula. It is not necessarily the full amount due each month: items such as taxes, insurance, escrow, or mortgage insurance may be billed separately or handled differently. Total interest is the sum implied by the modeled payments minus principal; it does not include fees, and it is not the same as total borrowing cost when charges apply.

A common misconception is that a lower monthly payment automatically means a lower-cost refinance. A longer term can reduce the payment while extending repayment, and fees can affect the overall comparison. Another mistake is comparing a new loan’s full-term interest with the current loan’s remaining interest without aligning the periods and balances. Compare like with like, and use actual lender figures for costs and timing.

APR and interest rate are related but not always interchangeable in an offer: the calculator accepts one APR input and treats it as the rate used in its payment formula. If an offer has fees or a rate structure that changes over time, this simplified model does not reproduce its full cost or payment schedule. Variable-rate loans, interest-only periods, balloon payments, and extra principal payments also fall outside the formula.

Costs, Comparisons, and Limits

A refinance may involve charges that are paid upfront or included in the new principal. To estimate the payment impact of financed costs, enter the resulting amount financed, not the balance alone. For costs paid separately, the calculator’s monthly payment does not include them, so add them separately when comparing scenarios. Obtain the actual rate, amount financed, term, payment, and itemized charges from the lender; these values depend on the specific offer and are not supplied by this calculator.

The model also assumes a fully amortizing loan with equal payments and a fixed rate. Its results are estimates, not a payoff quote or an offer. It cannot determine eligibility, approval, future rates, tax treatment, or whether a refinance suits a particular situation. A lender’s schedule may differ due to exact payment dates, rounding, fees, or contract terms.

Frequently Asked Questions

How do I calculate a refinance payment?
Enter the proposed amount financed, annual APR, and term. The calculator converts APR to a monthly rate and applies the standard fixed-payment amortization formula.

Does a lower refinance payment mean I will pay less interest?
Not necessarily. A longer repayment term can lower the monthly payment while increasing the time interest accrues. Compare the loan terms and costs as well as the payment.

Should I include refinance costs in the loan amount?
If costs are being added to the new balance, include them in the amount financed. If they are paid separately, leave them out of this payment calculation and consider them separately in a cost comparison.

Does the calculator include taxes and insurance?
No. The result estimates principal and interest only. Taxes, insurance, escrow, mortgage insurance, and lender charges are not modeled.

Why might my lender’s payment differ?
The lender may use different rounding, payment dates, fees, or loan terms, and the offer may include features this fixed-rate model does not represent. Check the lender’s disclosure for the contractual figures.

This result is an estimate; the lender’s disclosure gives the exact figures.

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in p | New loan amount | $ | 200000 | 1 | 100000000
in apr | New interest rate (APR) | % | 6.5 | 0.01 | 100
in yrs | New loan term | years | 30 | 0.0833 | 50
out pmt | New monthly payment | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2