Refinance Calculator

Overview

Refinance break-even and savings calculator wired to /refinance-calculator/[loanType] and /refinance-calculator/[loanType]/[state] via LoanTypeRefinanceCalculatorPage.tsx.

Formula

Current and new monthly P&I:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Monthly savings:

monthlySavings = currentPayment − newPayment

Break-even:

breakEvenMonths = ceil(totalClosingCosts / monthlySavings)   // when monthlySavings > 0

Lifetime net savings (term-change aware):

totalSavingsOverLife = (currentPayment × remainingMonths) − (newTotalPaid) − totalClosingCosts

Where newTotalPaid is scheduled P&I × new-term months, or simulated total P&I paid when extra principal payments apply.

Source: src/lib/refinance-calculator-math.ts

Inputs

Outputs

Current payment, new payment, monthly savings, break-even months, interest savings, lifetime net savings, effective rate (after points), PMI estimate, PMI removal month, total monthly with escrow.

Assumptions

• Fixed-rate amortizing loans for both current and new scenarios.
• Current payment computed on remaining balance over remaining term (simplified — does not use actual historical origination date).
• Cash-out increases new loan principal.
• PMI modeled at 0.5%/yr on new loan amount when initial LTV > 80%; removed when balance crosses target LTV (default 78%).
• Escrow is a pass-through added to total monthly; does not affect P&I or savings math.
• Discount points: 1 point = 1% of new loan amount added to closing costs; −0.25% rate per point (standard industry convention per Freddie Mac / Bankrate refinance methodology).

Methodology sections

Term-change lifetime savings

When old and new terms differ (e.g., 30 years remaining → 15-year new loan), lifetime savings compares total P&I outlay over each horizon rather than multiplying monthly savings by the new term alone. Helper: computeTermChangeLifetimeSavings().

Early payoff on new loan

Optional extraMonthlyPayment simulates amortization via simulateLoanWithExtraPayment(), updating newPayoffMonths, totalInterestNew, and lifetime savings.

PMI removal

When currentLTV is provided, home value = balance ÷ (LTV ÷ 100). If new-loan LTV > 80%, monthly PMI = 0.5%/yr of loan amount until balance ÷ home value ≤ targetLTVForPMIRemoval (default 78%).

Discount points

Points cost = discountPoints × 1% × newLoanAmount. Effective rate = newRate − (discountPoints × 0.25). Convention cited: Freddie Mac Refinance Guide / Bankrate discount points methodology (0.25% rate reduction per point).

Known limitations

• Does not model FHA MIP tiers, VA funding fee, or lender-specific pricing grids.
• PMI uses flat 0.5%/yr; does not vary by credit score.
• Current-loan side does not model extra payments on the existing loan.

Files touched

• src/components/calculators/RefinanceCalculator.tsx
• src/lib/refinance-calculator-math.ts
• src/pages_old/LoanTypeRefinanceCalculatorPage.tsx
• app/refinance-calculator/[loanType]/page.tsx
• app/refinance-calculator/[loanType]/[state]/page.tsx

Fixed in Phase 1.2 (2026-08)

1. Term-change lifetime savings — totalSavingsOverLife now uses remaining old-term months vs new-term months.
2. Early payoff — optional extra payment on new loan with payoff and interest simulation.
3. Escrow, PMI removal, discount points — optional inputs with pass-through escrow, LTV-based PMI removal, and standard points convention.

Fixed in Phase 1.1b (2026-06-13)

Wired RefinanceCalculator to live refinance routes (previously rendered MortgageCalculator).