How our calculators work

Monthly payment and amortization

For a fully amortized fixed-rate loan:

M = P · (r·(1+r)^n) / ((1+r)^n − 1)

where P is principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is total payments in months. Edge case: if r = 0, monthly payment is P / n.

Remaining balance after k payments uses the closed-form:

B_k = P · (1+r)^k − M · ((1+r)^k − 1) / r

This is what drives both the live result and the amortization comparison chart.

PMI (private mortgage insurance)

PMI applies to conventional loans with LTV above 80%, and is automatically removed at 78% LTV under the U.S. Homeowners Protection Act. The calculator uses industry-typical rate bands:

• 80–85% LTV → 0.50% annual base rate
• 85–90% LTV → 0.70%
• 90–95% LTV → 0.95%
• Above 95% LTV → 1.25%

The base rate is multiplied by a credit-score adjustment:

• FICO 760+ → 0.65× base
• 740–759 → 0.80×
• 720–739 → 1.00×
• 700–719 → 1.20×
• 680–699 → 1.45×
• 660–679 → 1.75×
• Below 660 → 2.10×

This is a model of industry pricing, not a quote. Actual PMI rates depend on the specific MI provider (MGIC, Radian, Essent, Arch, National MI, Genworth) and on additional risk factors (debt-to-income, property type, occupancy). Treat our PMI estimate as a starting point — your lender's Loan Estimate has the authoritative number.

FHA MIP

FHA loans carry two MIP components:

• Upfront MIP (UFMIP): 1.75% of the base loan amount, financed into the new loan balance.
• Monthly MIP: annual rate divided by 12, set per HUD Mortgagee Letter 2023-05 by term, LTV, and whether the base loan exceeds the national conforming loan limit ($832,750 baseline for 2026).

Standard (base loan ≤ national CLL):

• >15-yr term, LTV ≤ 95% → 0.50% annual
• >15-yr term, LTV > 95% → 0.55%
• ≤15-yr term, LTV ≤ 90% → 0.15%
• ≤15-yr term, LTV > 90% → 0.40%

High-balance (base loan > national CLL):

• >15-yr term, LTV ≤ 95% → 0.70%
• >15-yr term, LTV > 95% → 0.75%
• ≤15-yr term, LTV ≤ 78% → 0.15%
• ≤15-yr term, 78% < LTV ≤ 90% → 0.40%
• ≤15-yr term, LTV > 90% → 0.65%

FHA streamline / simple refinance carve-out (loan endorsed on or before May 31, 2009): UFMIP 0.01% and annual MIP 0.55% regardless of term and LTV. Enable the toggle in the FHA section of the calculator if this applies.

Source: HUD Mortgagee Letter 2023-05. HUD periodically adjusts these — we re-verify quarterly. The high-balance threshold is tied to the FHFA conforming loan limit, currently $832,750 for 2026.

VA funding fee

Veterans Affairs funding fee is a one-time charge financed into the loan:

• IRRRL (Interest Rate Reduction Refinance Loan): 0.50% of new loan amount
• Cash-out refinance, first use of VA entitlement: 2.15%
• Cash-out refinance, subsequent use: 3.30%
• Disabled veterans with a service-connected disability rating: exempt — override the field to $0

Source: Department of Veterans Affairs Funding Fee schedule, current as of 2024.

Closing costs assembly

The closing-cost line items below are HearthLoan modeled defaults — not market averages and not a quote. Origination, appraisal, attorney, title, and credit fees vary materially by lender, vendor, and county; Freddie Mac's consumer materials describe total refinance closing costs as typically 3%–6% of loan principal. Each line item is overridable:

• Origination fee: 1% of new loan amount (modeled default; lender-set, commonly 0.5%–1.5%)
• Discount points: $0 by default (user input)
• Appraisal: $600 modeled estimate (typical $400–$700)
• Title insurance: state-specific rate × new loan amount (regulated rate in TX, NM, FL; industry estimate elsewhere)
• Recording fee: state-specific flat amount
• State transfer / deed tax: state-specific rate × new loan amount (zero in many states)
• Mortgage recording tax: state-specific (NY, TN, OK, MN, AL, GA, KS, FL primarily)
• Attorney fee: $850 modeled default in attorney-required states (NY, MA, GA, SC, CT, DE, RI, VT, WV, NC)
• Flood certification: $18 modeled default
• Credit report: $30 modeled default (CFPB notes the typical pre-Loan-Estimate credit fee is < $30)
• Survey, Other: $0 default (user override)

The authoritative source for your actual closing costs is the Loan Estimate (LE) document your lender provides within 3 business days of application, mandated by the Truth in Lending Act / RESPA Integrated Disclosure (TRID) rule.

Breakeven point

Cash-flow breakeven, in months:

breakeven = ⌈ out-of-pocket closing costs / monthly P&I savings ⌉

If closing costs are rolled into the new loan, out-of-pocket costs are zero — but the rolled-in amount raises the new monthly payment, which is already reflected in the calculation.

If monthly P&I doesn't decrease (the new payment is the same or higher), there is no breakeven and the calculator says so.

We use cash-flow breakeven, which is the more conservative of the two common methods. An alternative — total-cost breakeven, which compares lifetime interest savings against closing costs — would show a faster recovery but doesn't reflect the actual monthly cash position.

State-specific defaults

The calculator's state selector loads 50 states + D.C. defaults from a calibrated table. Source mapping:

• Effective property tax rate: Tax Foundation "Property Taxes by State and County" series, cross-referenced with U.S. Census ACS Table B25103. The latest Tax Foundation publication uses calendar year 2023 owner-occupied housing values — the most recent ACS data available. Presented in the UI as an estimate, not a forecast.
• Homeowners insurance baseline: HearthLoan modeled estimate for an HO-3 policy on a single-family home, calibrated against NAIC state average premium data (latest published series: 2022) and supplemented with 2026 quote-based market data in higher-risk states (FL, TX, OK, LA, CA wildfire zones). Baselined to $300,000 home value and scaled linearly. Labeled as a modeled estimate in the UI — not an official state average. Real premiums vary widely by construction, deductible, claims history, and proximity to coast.
• Transfer / deed taxes: each state's department of revenue or taxation. State-level only — counties and cities often add local rates that we flag in the UI.
• Mortgage recording tax: specific to states that levy it (NY, TN, OK, MN, AL, GA, KS, FL). Source: state revenue departments.
• Florida intangible tax on cash-out: 0.20% nonrecurring intangible tax applied to the cash-out portion of new money. Per Florida technical advisements, refinances of an existing obligation may be exempt from additional intangible tax when no new principal is added — confirm with your title company.
• Title insurance: regulated state filings in TX, NM, FL; industry-survey averages elsewhere.
• Attorney-state flag: state bar association opinions and case law for states where an attorney is effectively required at closing.

The full state table is maintained in state-data.js and re-verified quarterly. Property-tax rows will be rebuilt when Tax Foundation publishes its next series; insurance baselines will be rebuilt when NAIC publishes a post-2022 state average premiums table.

Limitations

The calculator does not apply to:

• Adjustable-rate mortgages after the reset point
• Loans with prepayment penalties
• Negative-amortization or interest-only products
• Refinances combined with second-lien subordination
• Cash-out scenarios above state-specific caps (Texas Section 50(a)(6) cap is detected; other state restrictions may apply)

The calculator does not model:

• Mortgage interest tax deduction effects (we don't know your itemization status or marginal rate)
• Opportunity cost of paying closing costs out of pocket versus investing those funds
• Lender-specific pricing adjustments beyond standard PMI/MIP/VA
• Local property tax overrides (we use state-level effective rates; many counties differ substantially)

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Found a calibration error or missing edge case? Email [email protected] — methodology corrections get same-day turnaround.