Loan Refinance Savings Calculator: Compare Costs

A loan refinance savings calculator estimates how a replacement loan changes your monthly payment and total interest compared with your current loan. Enter the current balance, current APR and remaining term, plus the new loan’s APR, term and fees, to see an estimated payment difference and net savings over the comparison period.

Formula

The calculator compares estimated payments for two fixed-rate, fully amortizing loans, then compares their scheduled payment totals over the shorter of the two payoff periods. Fees are added to the cost of refinancing. In symbols, monthly payment is M = P × r ÷ [1 − (1 + r)⁻ⁿ], where r = APR ÷ 1200 and n = years × 12. Estimated net savings are S = (B + F − M_old × 12T) − (M_new × 12T), with T the smaller of the two terms in years.

• B: current loan balance, in dollars.
• F: new-loan fees, in dollars.
• APR: annual percentage rate entered as a percent; the formula converts it to a monthly rate.
• M_old and M_new: estimated monthly payments in dollars.
• T: shorter payoff term, in years.
• S: estimated net savings in dollars. A positive figure means the modeled refinancing cost is lower over this comparison period; a negative figure means it is higher.

The savings calculation treats the current balance as the amount that would otherwise be repaid, and the new balance as the current balance plus entered fees. The payment outputs themselves use the current balance as principal for both payment estimates; fees are included separately in the savings comparison.

Worked Example

Using the defaults—$20,000 balance, 8% current APR with five years remaining, 6% new APR over five years, and $500 fees—the monthly rates are 0.08 ÷ 12 = 0.0066667 and 0.06 ÷ 12 = 0.005. Each term has 60 monthly payments.

1. Current payment: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] = $405.53 per month.
2. New payment: $20,000 × 0.005 ÷ [1 − (1.005)⁻⁶⁰] = $386.66 per month.
3. Comparison-period costs: current scheduled payments total $405.53 × 60 = $24,331.80. New scheduled payments total $386.66 × 60 = $23,199.60; adding $500 fees gives $23,699.60.
4. Estimated net savings: $24,331.80 − $23,699.60 = $632.20. The estimated monthly payment reduction is $405.53 − $386.66 = $18.87.

Because the displayed payment outputs are rounded to cents but the savings expression uses unrounded formula payments, the calculator may show a small difference from manually multiplying the displayed payments. The example above uses the displayed cent-rounded payments for transparent arithmetic; the calculator’s savings result follows its stated expression.

Assumptions

• Both loans have fixed APRs and level monthly payments; the entered APR is treated as a nominal annual rate.
• Payments are made monthly, with the first payment one month after the starting balance is measured.
• Interest is modeled monthly at APR ÷ 12.
• The calculation excludes taxes, insurance, PMI, escrow, late charges, prepayment charges, and costs not entered as fees.
• The comparison is limited to the shorter loan term and does not model remaining balances or cash-flow value beyond that period.

How to Use the Calculator

Use figures from current loan documents and a written estimate for the proposed loan. The current balance is the amount still owed, not the original amount borrowed. Enter the remaining repayment term rather than the time since the loan began. For the new loan, use its proposed APR, term and fees; obtain those actual figures from the lender rather than substituting a market estimate.

• Include costs that are financed or paid at closing in the fee input, without counting the same cost twice.
• Keep term units consistent: the calculator asks for years, including fractions of a year where needed.
• Check whether an estimate’s APR incorporates costs and whether those costs are already separately entered. The calculator cannot determine that from the numbers alone.
• Run different term or fee scenarios separately to see how assumptions change the arithmetic.

Reading the Results and Break-Even

Monthly payment and total cost answer different questions. A longer new term can lower the monthly payment while increasing the number of payments, so a payment reduction alone does not establish that total borrowing cost falls. Here, the savings output compares modeled payment totals only through the shorter payoff period and adds the entered fees. It is not a full lifetime comparison when terms differ.

A simple break-even estimate is often described as fees divided by monthly payment reduction. With the example figures, $500 ÷ $18.87 is about 26.5 months. That shortcut assumes the payment reduction is consistent and ignores differences in interest and principal timing, so it is a rough cash-flow marker, not the calculator’s savings result or a guarantee.

Limits and Common Mistakes

The formula assumes standard amortization: a constant rate and equal scheduled payments that repay the balance by the end of the stated term. It does not handle variable rates, interest-only periods, balloon payments, irregular payment dates, or a refinance amount that differs from the entered balance plus fees. Actual payoff quotes can also differ because of accrued interest, timing and lender calculations.

• Do not enter the original loan amount in place of today’s balance.
• Do not compare a current APR with a new rate quote unless both are expressed on a comparable basis.
• Do not treat monthly payment savings as net savings; fees and the payoff period matter.
• Expect small rounding differences, especially when multiplying a displayed payment rounded to cents.

For a detailed comparison, use the lender’s payment schedule and disclosure, including the precise amount financed, all costs, payment dates and payoff figures. This calculator is educational arithmetic, not financial advice. The result is an estimate, and the lender’s disclosure gives the exact figures.

Frequently Asked Questions

What does a loan refinance savings calculator show?
It estimates payments for the existing and replacement loans and compares modeled costs over a stated period, including fees entered by the user. It cannot determine whether refinancing fits a person’s circumstances.

Does a lower monthly payment mean I save money?
No. A lower payment may result from extending repayment over more months. Compare fees, total scheduled payments and the period being measured, not just the monthly amount.

Should I include refinance fees?
Enter costs that apply to the new loan in the fee field if they are not already reflected elsewhere in the figures. Check the lender’s documents to avoid omitting or double-counting charges.

Why is the savings period the shorter loan term?
That comparison avoids projecting scheduled payments beyond the payoff date of either modeled loan. When the terms differ, it is not a complete lifetime-cost comparison; remaining balances and other timing effects may matter.

Can I use this for a variable-rate loan?
Not accurately across future rate changes. This calculation assumes a fixed APR for each loan’s entire modeled term.

Why does my lender’s payment differ?
The quoted payment may use a different balance, rate convention, term, payment date, financed costs or rounding method. Use the lender’s disclosed schedule for exact contractual figures.

Related

• Auto Loan Refinance Calculator: Estimate Payments and Interest
• 7-Year Personal Loan Refinance Calculator and Guide
• Personal Loan Refinance Calculator and Cost Guide

in bal | Current loan balance | $ | 20000 | 1 | 100000000
in oldapr | Current loan APR | % | 8 | 0.01 | 100
in oldyrs | Current remaining term | years | 5 | 0.0833 | 50
in newapr | New loan APR | % | 6 | 0.01 | 100
in newyrs | New loan term | years | 5 | 0.0833 | 50
in fees | New loan fees | $ | 500 | 0 | 1000000
out save | Estimated net savings over the shorter payoff period | $ | (bal + fees - (bal * (oldapr / 1200) / (1 - (1 + oldapr / 1200) ^ -(oldyrs * 12))) * min(oldyrs, newyrs) * 12) - ((bal * (newapr / 1200) / (1 - (1 + newapr / 1200) ^ -(newyrs * 12))) * min(oldyrs, newyrs) * 12) | 2
out oldpmt | Current monthly payment | $ | bal * (oldapr / 1200) / (1 - (1 + oldapr / 1200) ^ -(oldyrs * 12)) | 2
out newpmt | New monthly payment | $ | bal * (newapr / 1200) / (1 - (1 + newapr / 1200) ^ -(newyrs * 12)) | 2
out diff | Monthly payment reduction (positive means lower) | $ | oldpmt - newpmt | 2