Mortgage Refinance Calculator and Homeowner Questions

This mortgage refinance calculator estimates the monthly principal-and-interest payment and total interest on a replacement loan from its amount, APR, and term. Enter the proposed new loan figures to see the payment and interest estimate; compare them with your current loan figures separately, since this calculator does not determine whether refinancing saves money.

Formula

The calculator uses the standard fixed-payment amortization formula. First, it finds a monthly payment from the loan amount, monthly interest rate, and number of monthly payments. Then it multiplies that payment by the number of months and subtracts the principal to estimate total interest.

• P is the proposed new loan amount in dollars.
• APR is the annual percentage rate entered as a percentage per year. The monthly rate is r = APR / 1200.
• t is the term in years; the number of monthly payments is n = 12t.
• M is the monthly principal-and-interest payment in dollars, rounded to the nearest cent.
• I is estimated total interest in dollars: I = M × n − P.

In symbols, M = round(P × r / [1 − (1 + r)⁻ⁿ], 2), and I = M × n − P. The payment is rounded before total interest is calculated, so the total reflects the displayed payment multiplied by the full number of payments.

Worked Example

Using the calculator’s default values—$20,000, an 8% APR, and a five-year term—the monthly rate is 8 / 1200 = 0.0066667, and the term is 5 × 12 = 60 monthly payments.

1. Payment before cent rounding: $20,000 × 0.0066667 / [1 − (1 + 0.0066667)⁻⁶⁰] ≈ $405.53.
2. Monthly principal-and-interest payment, rounded to cents: $405.53.
3. Total of payments: $405.53 × 60 = $24,331.80.
4. Estimated total interest: $24,331.80 − $20,000 = $4,331.80.

Assumptions

• The interest rate is fixed for the full term.
• Payments are equal monthly payments made at the end of each monthly period.
• Interest accrues monthly using APR divided by 12.
• The estimate excludes refinance fees, taxes, homeowners insurance, mortgage insurance, escrow, and any costs added to the loan unless they are included in the entered loan amount.

How Refinancing Works

Refinancing replaces an existing mortgage with a new loan. The new loan may have a different principal, rate, term, or structure. At closing, proceeds from the replacement loan generally pay off the old mortgage; any costs paid upfront or added to the balance affect the overall cost. The calculator models only a new fixed-rate loan’s principal and interest, not the transaction or the payoff process.

To make a meaningful comparison, gather the current loan’s unpaid principal, interest rate, remaining term, and monthly principal-and-interest payment. Then obtain the proposed loan’s written figures from the lender, including its amount, APR, term, and itemized costs. Use matching assumptions and compare the remaining cost of keeping the current loan with the cost of the replacement loan, including fees and the time you expect to keep it. A lower monthly payment alone does not establish lower overall cost: extending the term can reduce the payment while increasing the number of payments.

Costs, Break-Even, and Comparing Offers

Refinancing costs may include lender charges, appraisal or other third-party services, and prepaid items. Which charges apply and how they are handled depend on the transaction; request an itemized estimate rather than assuming every cost is paid in cash. A cost described as “no cost” may be offset in another part of the offer, such as a different rate or loan balance, so examine the full figures.

A basic break-even estimate divides refinance costs paid upfront by monthly payment reduction. For example, if costs were $3,000 and the payment fell by $100, the simple calculation would be 30 months. This is only a rough screening calculation: it ignores differences in principal reduction, interest over time, added loan costs, and the effect of extending the term. It is not part of this calculator, which has no fee or current-loan inputs.

When comparing offers, check that the loan amounts reflect the same treatment of fees and cash taken out, and compare both term and total scheduled payments. APR can help describe borrowing cost, but it does not replace reviewing the itemized charges, payment schedule, and loan terms. Ask the lender for the exact figures used in its disclosures.

When This Estimate Helps—and Its Limits

Use this calculator to understand how a proposed amount, APR, and term translate into a scheduled principal-and-interest payment and interest total. It can also illustrate the term trade-off: for the same principal and rate, a longer term generally spreads repayment over more months, while the total interest calculation includes all those payments.

The result is not a full monthly housing payment. Property taxes, insurance, mortgage insurance, escrow deposits, and association charges may be separate. It also does not model adjustable rates, irregular payment dates, extra payments, a changing balance, prepaid interest, closing costs, or a lender’s exact rounding and servicing methods. If fees are financed, include them in the proposed loan amount to see their effect on this limited arithmetic; that still does not calculate whether the transaction is financially beneficial.

Rates, costs, and eligibility are not determined here. Use figures supplied for the specific proposed loan rather than treating the sample defaults as a quote or prediction. The calculator is educational arithmetic, not financial advice.

Frequently Asked Questions

What does refinancing a mortgage mean?
It means replacing an existing mortgage with a new loan. The new loan can have a different amount, rate, repayment term, or other terms, and the old loan is paid off as part of the transaction.

Does refinancing always lower the monthly payment?
No. The payment depends on the new balance, APR, and term. A larger balance, shorter term, or different rate can raise it; a longer term may lower the payment while increasing the number of payments and potentially total interest.

Does this calculator include closing costs?
No. It calculates principal and interest only. Enter costs in the loan amount only if they are being added to the balance, and remember that this does not model upfront costs or all transaction expenses.

How do I estimate a refinance break-even point?
A rough method is upfront refinance costs divided by the monthly payment reduction. The result is only a screening estimate and does not account for changes in principal repayment, loan term, or other costs.

Why is the lender’s payment different from this result?
The lender’s figure may use a different loan amount, rate, term, payment date, rounding method, or included charges. This calculator excludes taxes, insurance, escrow, and fees, so compare its principal-and-interest figure with the matching line in the lender’s documents.

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

Related

• Loan Refinance Break Cost Calculator and Explanation
• Debt Service Coverage Ratio: Ideal DSCR Explained
• Interest Service Coverage Ratio Calculator

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