Should You Refinance?

This tool uses a five-component methodology for accurate break-even analysis:

The Five Components

• 1. Cash to Close: Out-of-pocket expense (positive) or cash received (negative).
• 2. Escrow Benefit: Shortage avoided minus surplus foregone by refinancing.
• 3. Skipped Payments: Full PITI payments not made during the refi gap period.
• 4. Payment Differential: Cumulative P&I + PMI savings over time.
• 5. Balance Differential: Old loan balance minus new loan balance.

Net Position Formula

Net Position = Balance Diff + Payment Diff + Skipped Payments + Escrow Benefit − Cash to Close

PMI Handling

• Original Loan: PMI drops at 78% of original purchase price.
• New Loan: PMI drops at 80% of current home value.

Apples-to-Apples Mode

Equalizes cash outflow by applying savings as extra principal to the loan with the lower payment. Only escrow remains as an out-of-pocket difference.

APR Estimation

The estimated APR isolates true financing costs from the balance differential:

True Closing Costs = Balance Diff − Escrow Funding − $1,250 (non-APR fees) + Cash to Close

Where Escrow Funding = Beginning escrow balance needed at first payment + shortage (or − surplus). The $1,250 estimate covers typical non-APR fees (credit report, title insurance, appraisal, recording). APR is then calculated as the rate producing the same payment on the amount financed (loan amount minus true closing costs).