Refinance Loan Payment Comparison Calculator

This refinance loan calculator compares the monthly payment and total interest on a current loan with those on a replacement loan. Enter each loan’s balance, APR, and remaining or new term to see the payment difference and the interest estimate; it does not decide whether refinancing makes financial sense.

Formula

The calculator estimates each loan’s level monthly principal-and-interest payment using the standard amortizing-loan formula:

Payment = P × r / (1 − (1 + r)−n)

• P is the loan principal or balance, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 1,200 when APR is entered as a percentage per year.
• n is the number of monthly payments: term in years × 12.

The new-loan payment uses the new amount, APR, and term; the current-loan payment uses the current balance, APR, and remaining term. Each payment is rounded to the nearest cent before the calculator finds the monthly change. New-loan total interest is estimated as the rounded payment multiplied by the number of months, less the new loan amount. A negative monthly change means the calculated new payment is lower; a positive change means it is higher. This is a cash-flow comparison, not a complete measure of refinancing costs or savings.

Worked Example

Using the calculator’s default values: current balance $20,000 at 8% APR with 5 years remaining; new loan amount $20,000 at 6% APR for 5 years.

1. Convert the new APR to a monthly rate: 6 ÷ 1,200 = 0.005. There are 5 × 12 = 60 payments.
2. New payment = $20,000 × 0.005 ÷ [1 − (1.005)⁻⁶⁰] = $386.66 per month, rounded to cents.
3. Current monthly rate = 8 ÷ 1,200 = 0.0066667; with 60 payments, the current payment is $405.53 per month, rounded to cents.
4. Monthly payment change = $386.66 − $405.53 = −$18.87. The negative sign indicates a lower modeled payment for the new loan.
5. New-loan total interest estimate = $386.66 × 60 − $20,000 = $3,199.60.

The comparison assumes the new amount equals the current balance. If costs are added to the replacement loan, enter the resulting new principal instead; that changes both its payment and total-interest estimate.

Assumptions

• The APR is fixed over each modeled term.
• Payments are equal, made monthly, and begin one month after the loan starts.
• Interest compounds monthly at APR divided by 12.
• The calculation excludes fees, taxes, insurance, PMI, escrow, and any costs not included in the new loan amount.

How to Compare the Loans

For a meaningful estimate, use the current payoff balance rather than the original amount borrowed, and use the remaining term rather than the loan’s original term. For the proposed loan, enter the amount actually being financed and its quoted APR and term. Obtain those figures from the lender’s written estimate or disclosure; the example defaults are only arithmetic inputs, not market-rate claims.

Look at payment, total interest, and time separately. A longer replacement term can lower the monthly payment while increasing the number of payments and possibly the total interest. A shorter term can have the opposite pattern: larger monthly payments but fewer months of interest. The calculator reports the new loan’s interest estimate, not a complete lifetime comparison against the current loan. To compare overall costs, include the current loan’s remaining payments and any costs of replacing it, using figures supplied by the relevant parties.

Loan amounts may also differ. A replacement loan might cover a payoff balance plus financed costs, or it might be smaller if the borrower contributes funds. Because principal is part of the payment formula, compare like-for-like assumptions and do not treat a lower payment by itself as proof of lower total cost.

Costs, Break-Even, and What Is Excluded

Refinancing can involve costs that are not represented by the APR and principal inputs alone. Ask for an itemized estimate of charges and clarify which are paid upfront, included in the new balance, or otherwise handled. This calculator does not estimate taxes, insurance, escrow, PMI, prepayment charges, or product-specific costs. It also does not model variable rates, irregular payments, skipped-payment periods, or changes in payment schedules.

A simple break-even calculation can help organize costs, but it is not built into this calculator: divide relevant upfront costs by the monthly payment reduction, if that reduction is positive. For example, costs of $900 and a modeled monthly reduction of $30 imply 30 months to equal those costs through payment differences. This rough calculation ignores interest timing, any change in total interest, and other costs or risks. If the payment is not lower, that particular division does not produce a meaningful break-even period.

Common Comparison Mistakes and Limits

• Comparing different time periods: Use the current loan’s remaining term, not its original length, and compare it with the proposed term.
• Ignoring the new principal: If costs are financed, the replacement balance may exceed the current payoff amount.
• Focusing only on the payment: A lower payment can result from extending repayment, not necessarily from reducing total interest or total cost.
• Mixing APR and monthly rates: Enter APR as a percentage such as 6, not 0.06; the formula converts it to a monthly decimal.
• Treating estimates as exact disclosures: Rounding, payment dates, lender calculations, fees, and loan terms can produce different figures.

The formula is for fixed-rate loans with level monthly payments. It is not a quote, approval assessment, recommendation, or full present-value analysis. It also does not account for how a lender applies payments or calculates a payoff figure. Check the exact balance, costs, rate structure, term, and payment schedule in the lender’s documents.

Frequently Asked Questions

How do I compare a current loan with a refinance loan?
Compare payments using the current payoff balance, current APR, and remaining term against the proposed amount, APR, and term. Also examine total interest and costs, since monthly payment alone can be misleading.

Does a lower monthly payment mean refinancing saves money?
No. A lower payment may come from extending the term, and fees or a larger new balance may change the overall cost. Compare the complete payment schedule and itemized costs.

Should refinance costs be included in the new loan amount?
Include them in the new-loan amount if they will be financed. If paid separately, do not add them to principal, but account for them separately when assessing total costs.

What does a negative monthly payment change mean?
It means the calculator’s new-loan payment is lower than the modeled current payment. It does not show whether total interest or total costs are lower.

Does this calculator include closing costs or taxes?
No. It calculates level principal-and-interest payments and new-loan interest from the entered figures. Costs, taxes, insurance, PMI, and escrow are not modeled unless reflected in the new loan amount.

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

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in p | Current loan balance | $ | 20000 | 1 | 100000000
in apr | Current interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Current remaining term | years | 5 | 0.0833 | 50
in np | New loan amount | $ | 20000 | 1 | 100000000
in napr | New interest rate (APR) | % | 6 | 0.01 | 100
in nyrs | New loan term | years | 5 | 0.0833 | 50
out pmt | New monthly payment | $ | round(np * (napr / 1200) / (1 - (1 + napr / 1200) ^ -(nyrs * 12)), 2) | 2
out oldpmt | Current monthly payment | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out diff | Monthly payment change (new minus current) | $ | pmt - oldpmt | 2
out interest | New loan total interest | $ | pmt * nyrs * 12 - np | 2