Loan Refinance Calculator: Compare Payments and Interest

A loan refinance calculator estimates the payment and total interest on a replacement loan using its amount, APR, and term. Enter the new loan details to see the monthly payment and interest over the full term; this basic calculator does not compare the new loan with your current loan or include refinancing costs.

Formula

The calculator uses the standard fixed-payment amortization formula. It assumes monthly payments and converts the annual percentage rate (APR) to a monthly rate:

• Monthly payment: M = P × r / [1 − (1 + r)⁻ⁿ]
• Total interest: I = M × n − P

P is the replacement loan amount in dollars, apr is the annual APR in percent, r is the monthly rate as a decimal (apr ÷ 1200), n is the number of monthly payments (years × 12), M is the monthly payment in dollars, and I is total interest in dollars. The payment is rounded to cents; total interest is calculated using that rounded payment. The formula applies when the APR is above zero and the payment schedule is level.

Worked Example

Using the default inputs—$20,000, 8% APR, and five years—the calculation is:

1. Convert the APR to a monthly decimal rate: r = 8 ÷ 1200 = 0.0066667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Substitute into the payment formula: M = 20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)⁻⁶⁰] = $405.53 per month, rounded to cents.
4. Calculate interest using the rounded payment: I = $405.53 × 60 − $20,000 = $4,331.80.

The outputs are an estimated monthly payment of $405.53 and total interest of $4,331.80 over 60 scheduled payments.

Assumptions

• The APR and payment amount stay fixed throughout the loan term.
• Payments are monthly, made at the end of each period, with the first payment one month after the loan begins.
• Interest accrues monthly at APR ÷ 12, expressed as a decimal.
• The calculation excludes refinancing fees, taxes, insurance, PMI, escrow, and any other charges unless included in the loan amount you enter.

How to Use a Refinance Calculator

Enter the amount you expect to borrow in the replacement loan, its quoted APR, and the repayment term in years. Use the lender’s figures for the actual proposed loan rather than assuming that a lower payment alone means lower overall cost. If costs are financed, the loan amount may include them; if they are paid separately, this calculator does not add them to its totals.

Read the two results together. The payment is a scheduled monthly principal-and-interest estimate. Total interest is the interest implied by making every scheduled payment through the end of the term. It is not the amount due at closing, a payoff quote, or a comparison against your existing loan.

For a meaningful refinance comparison, gather comparable figures for both loans: remaining balance, current payment, remaining term, proposed APR, proposed term, and fees. This calculator handles only the proposed loan’s basic payment and interest. A longer term can reduce the monthly payment while increasing the number of months interest accrues. Likewise, fees can change the overall cost even if the new payment is lower.

What the Results Can and Cannot Tell You

The loan amount should represent the principal used in the payment calculation. A lender may quote a payoff amount that differs from the balance shown on a statement because interest or other charges can accrue between statement dates; use the amount applicable to the proposed transaction. Confirm how the lender treats fees and whether they are paid upfront or added to the new principal.

APR is entered as a yearly percentage, not as a monthly rate. For example, enter 8 for 8%, not 0.08 or 8 divided by 12. The calculator performs the annual-to-monthly conversion. Its monthly compounding convention is a simplifying assumption; actual contracts and payment schedules can treat accrual, dates, and rounding differently.

This calculation is most useful for a fixed-rate loan with equal monthly payments. It does not model a variable rate, irregular payments, skipped or late payments, extra principal payments, a changing balance, or a payment frequency other than monthly. It also does not establish approval, a final quote, or the amount required to close. Get the real rate, charges, payment schedule, and payoff details from the lender.

Common Refinance Calculation Mistakes

• Comparing payment alone: A smaller payment may result from a longer term, not lower total interest or lower total cost.
• Leaving out charges: Fees paid upfront still affect the cost of refinancing, even though they are absent from the formula. Adding financed charges to the principal changes both payment and interest.
• Mixing up APR and interest rate: APR is entered as a percentage per year. The formula converts it to a monthly rate; do not convert it a second time.
• Rounding too early: Small differences can arise when a lender rounds each payment or calculates daily interest. This calculator rounds the monthly payment to cents, then multiplies that rounded amount by the number of payments for its interest estimate.

To compare two scenarios, calculate each using its own loan amount, APR, and term, then account separately for fees and the current loan’s remaining costs. Keep the comparison periods consistent. For instance, comparing five years of payments on one option with a longer loan’s full-term interest can produce a misleading impression because the totals cover different periods.

Frequently Asked Questions

What does a loan refinance calculator calculate?
It estimates the monthly principal-and-interest payment and total interest for a replacement loan based on the amount, APR, and term entered. This version does not calculate savings versus an existing loan.

Does refinancing always lower the monthly payment?
No. The result depends on the replacement loan amount, APR, and term. A longer term can lower the scheduled payment while extending repayment, and a higher amount borrowed can raise it.

Should refinance fees be included in the loan amount?
If fees are financed and included in the replacement principal, include them in the amount entered. If paid separately, this calculator will not count them, so consider them separately when comparing costs.

Why can the lender’s payment differ from this estimate?
The lender may use different payment dates, daily interest accrual, rounding conventions, loan terms, or included charges. Use the lender’s disclosure for the transaction’s exact figures.

Does total interest include fees?
No. It is calculated from the rounded monthly payment and principal only. It excludes fees and other charges unless they are included in the entered loan amount, and it does not separately identify their cost.

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

Related

• Loan Balance Equation: Formula and Calculator
• Loan Balance Amortization Schedule Calculator
• Loan Balance Calculator: Estimate What You Still Owe

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