Calculation methodology and assumptions

Fixed-rate amortization

For a principal P, monthly rate r = annual interest rate ÷ 12 and n monthly payments, the level monthly principal-and-interest payment is P × r ÷ [1 − (1 + r)⁻ⁿ]. At a zero interest rate, payment is P ÷ n.

Each month, interest equals the opening balance multiplied by the monthly rate. Principal paid equals the scheduled payment minus interest, limited to the remaining balance. Calculations retain full precision internally and round displayed dollars to cents.

Term inputs in years are converted to whole months. This tool models equal monthly payments; it does not model biweekly servicing, variable rates, skipped payments or changing rates.

Remaining-cost comparison

The current-loan model uses today’s balance, current rate and remaining months. The proposed refinance uses that balance, the proposed rate and the new term. The comparison shows the scheduled principal-and-interest payments and remaining interest on each path.

Upfront refinance closing costs are added to the new path when comparing remaining interest plus fees. This simplified comparison assumes fees are paid in cash, the principal balance does not change, and neither loan has additional charges. It does not compute a net-present-value analysis.

Simple break-even

Simple break-even months = upfront closing costs ÷ monthly principal-and-interest savings when savings are positive. If savings are zero or negative, no positive simple break-even exists.

This metric does not adjust for equity differences, taxes, deductions, inflation, investment returns or future refinancing. It should not be used alone to decide whether a refinance is worthwhile.

Cash-out and LTV

LTV percentage = mortgage amount ÷ estimated property value × 100. At a chosen target maximum LTV, maximum new loan = home value × target LTV. Estimated available cash = maximum new loan − current balance − assumed cash-out fees, floored at zero.

These calculations do not determine whether a lender will allow that LTV, require mortgage insurance, or apply special program limits.

Discount points

Point cost = new loan amount × points percentage ÷ 100. Compare two hypothetical monthly payments using the same loan balance and term, changing only the rate. Divide point cost by positive monthly savings to obtain a simple break-even estimate.

Real loan offers can include other fees, lender credits, and rate lock conditions. Compare complete written disclosures rather than assuming a fixed exchange between points and rates.

Extra-payment model

Extra monthly principal is applied after the scheduled payment each month. Interest is calculated on the opening monthly balance. The simulation stops when the loan is paid off, and it reports estimated interest savings and payoff months.

The model assumes no penalties, consistent extra payments and a fixed rate. It does not account for escrow or lender-specific payment posting rules.

What these tools intentionally exclude

Property taxes, insurance, HOA dues, mortgage insurance, escrow funding, prepaid interest, adjustable-rate resets, lender credits, tax consequences and individual eligibility are not included unless explicitly identified. Verify all material figures with lender documents and qualified professionals.