Refinance vs Extra Payments Calculator

This calculator compares paying extra on your current loan with refinancing into a new fixed-rate loan, estimating each option’s monthly payment, total interest, and interest savings after refinance costs. Enter your current balance, rate, remaining term, extra monthly payment, proposed refinance rate and term, and estimated fees; results are arithmetic estimates, not a recommendation.

Formula

The comparison uses level-payment amortization. For principal P, monthly rate r = APR / 1200, and number of monthly payments n = years × 12, the monthly payment is M = P × r / [1 − (1 + r)⁻ⁿ]. Scheduled total interest is M × n − P.

The calculator’s first result is estimated interest savings from extra payments compared with refinancing: current-loan interest avoided by applying the extra-payment amount, minus refinance interest and upfront costs. In this simplified comparison, “interest avoided” is approximated as the current scheduled interest; extra payments do not actually eliminate all of it, so the displayed comparison is not a valid extra-payment payoff calculation. The inputs are:

• bal: current principal balance, in dollars.
• apr and rapr: current and refinance annual percentage rates, in percent.
• yrs and ryrs: remaining current term and refinance term, in years.
• extra: additional monthly payment, in dollars.
• fee: estimated refinance costs paid upfront, in dollars.

Important limitation: because the calculator does not model an amortization schedule with the extra payment, the extra amount is not used in the equations. Therefore the first result is only a rough scheduled-interest comparison, not a true refinance-versus-extra-payments calculation. A complete comparison must calculate the changing balance and payoff date for extra payments. The current monthly payment and totals shown are principal-and-interest estimates; refinance costs are added to the refinance total.

Worked Example

Using the defaults: current balance is $20,000, current APR is 8%, and the remaining term is 5 years, or 60 months. The monthly rate is 0.08 / 12 = 0.0066667. Current monthly payment is $20,000 × 0.0066667 / [1 − (1.0066667)⁻⁶⁰] = about $405.53. Scheduled current interest is $405.53 × 60 − $20,000 = $4,331.80.

For refinancing at 6% over 5 years, the monthly rate is 0.06 / 12 = 0.005. The estimated payment is $20,000 × 0.005 / [1 − (1.005)⁻⁶⁰] = about $386.66. Scheduled interest is $386.66 × 60 − $20,000 = $3,199.60. Adding $500 in upfront costs gives $3,699.60 in refinance interest and costs. The calculator’s first result is $4,331.80 − $3,699.60 = $632.20 of estimated savings versus refinancing. The $100 extra-payment input does not affect this result, which illustrates why this simplified output must not be treated as a full comparison.

Assumptions

• The interest rate stays fixed for each modeled loan.
• Payments are monthly and made at the end of each month.
• Interest compounds monthly at APR divided by 12.
• Taxes, insurance, escrow, penalties, variable-rate changes, and fees beyond the upfront refinance-cost input are excluded.
• The comparison assumes the refinance balance equals the current balance and does not model a changed payoff schedule from extra payments.

How to Compare the Options

A meaningful decision comparison needs more than the quoted monthly payment. Refinancing can change the rate, term, payment, and total interest; paying extra generally reduces principal sooner while keeping the existing loan terms. A longer refinance term can lower the payment while increasing the time interest accrues. Compare both options over the same period, and account for the point at which refinance costs would be recovered.

For an accurate extra-payment estimate, calculate each month’s interest on the opening balance, subtract that interest from the regular payment to find principal reduction, then subtract the extra payment as well. Repeat until the balance reaches zero. The final payment may be smaller than the scheduled amount. Compare the resulting cumulative interest and payoff month against the refinance’s amortization schedule, including costs and any change in loan balance.

• Use the lender’s written figures for the new APR, term, payment, and itemized costs.
• Check whether costs are paid upfront or added to the new balance; financing costs increases principal and interest.
• Use the actual current payoff balance, not the original amount borrowed.
• Keep the comparison period consistent, especially if one option pays off earlier.

What the Results Can and Cannot Tell You

A lower payment alone does not establish that one option costs less overall. It may reflect a longer term rather than lower borrowing cost. Likewise, extra payments can shorten repayment, but the actual interest saved depends on when payments are made, how the loan applies them, and whether the regular payment continues unchanged.

This calculator’s current and refinance payment figures use unrounded formula values for the displayed totals, so cents-level differences can occur compared with a lender’s schedule, which rounds each installment. The extra payment is included as an input to expose a key limitation, not because the current expressions model it. For a reliable side-by-side result, use an amortization calculator that accepts recurring extra principal payments or construct a month-by-month schedule.

Common Comparison Mistakes

• Comparing monthly payments without comparing total interest and costs.
• Assuming refinance fees disappear when rolled into the new balance.
• Comparing a shorter current payoff horizon with a longer refinance term as if the periods were equal.
• Entering an advertised rate instead of the actual loan offer’s APR and fees.
• Assuming every extra dollar is applied immediately to principal; confirm payment instructions and loan handling with the servicer.

Frequently Asked Questions

Is it better to refinance or make extra payments? The answer depends on the actual rates, costs, remaining term, payment schedule, and how long the loan is kept. This calculator provides only a simplified scheduled-interest comparison and does not model extra-payment amortization.

Do extra payments reduce principal or future interest? When applied to principal, an extra payment lowers the balance on which later interest is calculated. Ask the loan servicer how to direct extra funds and how they are credited.

Should refinance costs be included in the comparison? Yes. Include upfront costs or the amount added to the new balance. Also consider that financed costs can themselves accrue interest.

Why can refinancing lower the payment but increase total interest? Extending repayment over more months can reduce each scheduled payment while allowing interest to accrue for longer. Compare total costs over the period you expect to keep the loan.

Does this calculator fully calculate extra-payment savings? No. Its extra-payment field is not incorporated into the amortization equations. Use a month-by-month payoff calculator that models recurring additional principal to calculate that option accurately.

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

Related

• EMI Calculator Yearly: Estimate Annual Loan Payments
• Yes Bank EMI Calculator: Estimate Your Loan Payment
• EMI Calculator XLSX: Formula, Example and Limits

in bal | 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 extra | Extra monthly payment | $ | 100 | 0 | 100000000
in rapr | Refinance interest rate (APR) | % | 6 | 0.01 | 100
in ryrs | Refinance term | years | 5 | 0.0833 | 50
in fee | Refinance costs paid upfront | $ | 500 | 0 | 100000000
out save | Interest saved by extra payments vs refinancing | $ | (bal - bal) + (bal - (bal * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) * yrs * 12)) - ((bal * (rapr / 1200) / (1 - (1 + rapr / 1200) ^ -(ryrs * 12)) * ryrs * 12 - bal) + fee) | 2
out cur | Current monthly payment | $ | bal * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out extra_tot | Total interest with extra payments | $ | (bal * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) - bal) | 2
out ref_tot | Refinance interest plus upfront costs | $ | (bal * (rapr / 1200) / (1 - (1 + rapr / 1200) ^ -(ryrs * 12)) * ryrs * 12 - bal) + fee | 2