Refinance vs New Loan Comparison
Compare keeping, refinancing, or taking a new loan side by side.
Lowest total interest
- Refinance: monthly payment30 yr
- $1,419.47
- Refinance: total interest
- $261,011.50
- Refinance: total paid
- $515,011.50
- New loan: monthly payment30 yr
- $1,580.17
- New loan: total interest
- $318,861.58
- New loan: total paid
- $570,361.58
Ranked by total interest plus fees. A lower total interest usually comes with a higher monthly payment or a shorter term, so choose based on both the total cost and the payment you can afford. Loans of different terms are not adjusted for the time value of money.
How the refinance vs new loan comparison works
The tool amortizes each scenario you enter and ranks them by the one number that matters for cost: total interest plus fees. For every scenario it builds a full payment schedule using the standard level-payment formula M = P*r / (1 - (1+r)^-n), where P is the principal, r is the periodic rate (annual rate divided by 100, then by payments per year), and n is the number of payments. When the rate is 0%, the payment is just P / n.
The payment is rounded to the cent, then each month’s interest is computed on the running balance (interest = balance * r) and the rest of the payment reduces principal. Total interest is the sum of those rounded monthly interest amounts, not the algebraic M*n - P, so it matches what a real lender’s schedule would show. Each scenario’s total cost is that total interest plus its up-front fees. The scenario with the lowest total cost wins.
Worked example
Suppose you owe $220,000 and have 300 months (25 years) left. You compare keeping the current loan against a refinance.
Inputs
| Scenario | Principal | Annual rate | Term | Fees |
|---|---|---|---|---|
| Keep current | $220,000 | 5.50% | 300 months | $0 |
| Refinance | $220,000 | 4.25% | 300 months | $4,500 |
Steps for the refinance: the periodic rate is 4.25 / 100 / 12 = 0.00354167. The level payment is 220000 * 0.00354167 / (1 - (1.00354167)^-300) = $1,191.82. Summing the monthly interest across all 300 payments gives $137,548.05 in interest. Add the $4,500 in fees for a total cost of $142,048.05.
Results
- Keep current: payment $1,350.99, total interest $185,298.66, total cost $185,298.66
- Refinance: payment $1,191.82, total interest $137,548.05, fees $4,500, total cost $142,048.05
The refinance is cheaper by $43,250.61 over the horizon, even after the closing costs, and lowers the monthly payment by $159.17.
How to use it
- Enter your real remaining balance as the principal, not the original loan amount.
- Set each term to the months that fit the plan you would actually follow.
- Put all up-front charges (closing costs, origination, points) in the fees field. Leave it blank for the no-fee option.
- Add a third scenario to test a shorter term or a competing lender side by side.
- Read the total cost row first for lifetime cost, then check the monthly payment for affordability.
Limitations
This is an estimate, not financial advice. It compares scheduled interest and fixed up-front fees over the term you set; it does not model the time value of money, taxes, mortgage insurance, escrow, prepayment, rate changes on adjustable loans, or what you might earn by investing the fee money instead. It also assumes you keep each loan for its full term, so if you expect to sell or refinance again soon, the up-front fees weigh more heavily than the totals here suggest. Confirm exact figures with each lender’s official disclosure before deciding.
Frequently asked questions
Should I include closing costs in the comparison?
Yes. Closing costs, origination fees, and points are exactly what makes a lower rate worth less than it looks. Put every up-front charge in the fees field for each scenario. The tool adds those fees to that scenario's total interest, so a cheaper rate with heavy fees can still lose to a higher rate with none.
Why does the tool rank by total interest plus fees instead of by monthly payment?
A lower monthly payment often just means a longer term, which raises lifetime cost. Total interest plus fees measures what each option actually costs you over the horizon you set. The monthly payment is still shown so you can check affordability separately.
What does 'over the same horizon' mean here?
Each scenario is amortized over its own term in months. To compare fairly, set terms that represent the same plan (for example, the months remaining on your current loan against the same number of months on a refinance). Comparing a 15-year option against a 30-year option is valid, but the longer one will usually show more total interest.
Does a 0% rate work in the comparison?
Yes. When the annual rate is zero, the payment is simply principal divided by the number of months, and total interest is zero. Only the fees you enter contribute to that scenario's total cost.
Can I compare three options at once?
Yes. Add a third scenario such as a different lender or a shorter term. All scenarios are ranked together by total cost, cheapest first, with ties broken in favor of the one you entered earlier.