Refinance My Loan? Estimate the New Payment and Interest

This refinance calculator estimates the monthly payment and total interest on a replacement loan using its amount, APR, and term. Enter the proposed loan details to see the payment and interest over the full term; the estimate does not decide whether refinancing fits your circumstances.

Formula

The calculator uses the standard fixed-rate, fully amortizing loan payment formula. It first calculates the monthly payment, rounded to the nearest cent:

Payment = round(P × r / (1 − (1 + r)−n), 2)

Here, P is the new loan principal in dollars, r is the monthly interest rate as a decimal, and n is the number of monthly payments. The calculator converts the annual percentage rate to a monthly rate with r = APR / 1200, and converts the term in years to months with n = years × 12. It then estimates total interest as monthly payment × n − P, in dollars. Because the payment is rounded before that calculation, the total is an estimate based on the displayed monthly amount.

Worked Example

Using the default inputs—$20,000, an 8% APR, and a five-year term:

• Monthly rate: 8 / 1200 = 0.0066667.
• Number of payments: 5 × 12 = 60.
• Monthly payment: round(20000 × 0.0066667 / (1 − (1 + 0.0066667)−60), 2) = $405.53.
• Total paid using the rounded payment: $405.53 × 60 = $24,331.80.
• Estimated total interest: $24,331.80 − $20,000 = $4,331.80.

The calculated payment is the first result because it is the regular monthly payment implied by the inputs. The interest figure is the sum of estimated payments minus the amount borrowed; it is not a quote for a refinance transaction.

Assumptions

• The interest rate is fixed for the full term.
• Payments are level, made monthly, and begin according to a standard amortization schedule.
• Interest accrues monthly at APR divided by 12.
• The calculation excludes closing costs, lender fees, taxes, insurance, mortgage insurance, escrow, prepayment charges, and any charges added to the loan. Enter a loan amount that reflects the amount you want to model; obtain actual figures from the lender.

What Refinancing Changes

Refinancing replaces an existing loan with a new one. The new loan may have a different principal, APR, or payoff term. A lower monthly payment alone does not show whether the total cost falls: extending repayment can reduce each payment while increasing the number of payments and potentially the interest paid over time.

For example, suppose someone has several years left on a loan and considers replacing it with a new loan that runs for a longer period. Even if the new payment is smaller, the borrower may pay interest for more months. A fair comparison therefore needs more than the payment: compare the existing loan’s remaining payments and costs with the new loan’s projected payments, fees, and repayment period. This calculator models only the proposed loan’s scheduled payment and interest, not the existing loan or a break-even date.

Refinancing can also involve fees or other transaction costs. If such costs are paid separately, they are not reflected here. If they are added to the replacement balance, include them in the amount entered to see how a larger principal changes the estimate. The actual amount financed and quoted terms must come from the lender’s disclosure.

How to Use and Read the Estimate

1. Enter the amount of the proposed replacement loan, not automatically the original amount borrowed. Account for the payoff balance and any costs you intend to finance.
2. Enter the proposed APR as a percentage per year, such as 8 for 8%, and the repayment term in years. Use figures supplied for the loan you are evaluating, not a general market assumption.
3. Read the monthly payment and total interest together. The payment is a scheduled principal-and-interest estimate; it is not necessarily the full housing or debt cost.
4. Run separate calculations for other proposed amounts, rates, or terms. Keep the assumptions consistent so the results can be compared meaningfully.

The tool does not include variable-rate changes, irregular payments, skipped-payment arrangements, or daily interest calculations. If the proposed loan has a changing rate or a different payment structure, this fixed-rate estimate will not reproduce its schedule. The calculator also does not determine eligibility or predict the rate, costs, or approval terms a lender may offer.

Common Misunderstandings and Alternatives

A common misconception is that a lower monthly payment automatically means a cheaper loan. Payment size depends on the principal, rate, and time allowed to repay; a longer term can lower the installment while increasing cumulative interest. Another is that the quoted APR is the only amount to compare. Fees and other costs can affect the overall cost, but they are not included unless incorporated into the amount entered, and even then the calculator does not model every transaction detail.

Refinancing is not the only way to change a repayment schedule. Depending on the existing contract, a borrower can ask the current servicer for a payoff figure, payment schedule, or information about permitted repayment changes. Extra payments on an existing loan may also affect its payoff timing, but this calculator does not calculate that scenario. These are comparison options to investigate, not a recommendation to take a particular action.

Frequently Asked Questions

Should I refinance my loan?
The calculator cannot answer that for an individual borrower. Compare the existing loan’s remaining cost and payoff terms with the proposed loan’s payment, term, and complete costs; the inputs and actual terms must come from the relevant lender or servicer.

Does refinancing always lower the monthly payment?
No. The new payment depends on the amount borrowed, APR, and term. A new loan with a shorter term or a larger balance can have a higher payment even if another input changes favorably.

Does a lower payment mean I will pay less interest?
Not necessarily. A longer repayment period can lower the monthly payment but leave interest accruing over more months. Compare total costs and the remaining schedule, including costs not represented in this estimate.

Should I include refinance costs in the loan amount?
If you expect to finance those costs, include them in the amount being modeled. If you will pay them separately, the calculator’s interest result does not include them, so account for them separately when comparing actual offers.

Does this estimate include my full mortgage payment?
No. It estimates principal and interest only. Property-related charges, insurance, mortgage insurance, escrow, and other costs are excluded.

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

Related

• Loan Refinance Interest Rates and Payment Calculator
• Loan Refinance Interest-Only Payment Calculator
• Loan Refinance Interest Deduction: What to Know

in p | New 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 | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2