Bankrate reports that the new payment after a loan modification may be calculated by applying the new interest rate to the remaining loan balance. Other fees, such as closing costs for a mortgage refinance, may also factor into the final cost of the new loan.
Bankrate suggests that consumers compare the rates of their old loan to the new loan using the interest rates and loan terms. Mortgage refinances, for example, may reduce monthly payments by applying a lower interest rate. To calculate the benefit from a mortgage refinance, Bankrate suggests consumers calculate the new lower payment by multiplying the new interest rate by the remaining balance, dividing the total by the number of months left in the term, and adding this monthly interest paid to the amount of principal paid each month. This results in the total interest and principal paid each month.
If the new payment is lower, a loan modification may be worthwhile. Closing costs and fees may outweigh the benefits of refinancing, as Bankrate reports. The overall impact of refinancing a loan varies based on loan terms and applicable charges. Reduced interest paid over the life of the loan results in savings and smaller payments do not necessarily indicate lower expense, Bankrate states.