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Refinance your home

This worksheet allows you to compare the financial consequences of several different refinancing plans.

By financial consequences, we mean how much principal you can pay off, and how much money you can save. The sum of these we call your total assets.
You can see how differences in a variety of factors (such as interest rates, loan lengths, and closing costs) effect your total assets.

Up to three loan plans can be examined at a time. One of these can be an ARM or balloon loan. In addition, you can compare the financial impacts of a future home-equity loan (say, to pay for a child's education).

First time running ReFinance?  We recommend reading the description.
Or do you ... just want to calculate mortgage payments?

Select your loan options, and then

Principal Staring principal: (optional, the principal already paid off)
Principal remaining: (this is what you owe)
Strategy Pay off loan || Save to bank account || Mixed strategy
Payments Mortgage Payments: if blank, program will choose a suitable value
Savings &
Starting bank balance:   ||   Extra monthly savings:
Savings type: Normal savings || Sequence of bonds
Interest rate on tax free bonds: Start:   ||   Yearly increase:   ||   (+/-)Accelerator:
Marginal tax rate:                ||   Credit card premium:
Loan Plans Plan APlan BPlan ARM
Interest rate
Term (months)
Closing costs (from bank)
Closing costs (into loan)
Extra Consumption
Additonal ARM parameters Months of fixed-rate:       ||   Interest Adjusment:
Maximum rise -- Per year:   ||   Entire loan:

Home Equity Loan
Cash needed:
Month it is needed:   ||   Months needed to pay it off:
Interest premium:     ||   Home equity payments:

Display report in ...
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Months to report:
Descriptive title:


ReFinance will calculate the financial implications of refinancing your home mortgage. By financial implications, we mean the effects of a refinancing on your monthly payments, on the principal paid off, and on a bank account balance.
The basic philosophy of ReFinance is that each month you can invest money in your house, or you can invest money in your bank account, or you can spend it. ReFinance allows you to compare how different mortgages effect these categories. In other words, ReFinance recognizes that any mortgage plan involves tradeoffs. For example, a long-term-higher-rate plan may allow you to build a bank account (or have more cash available for living expenses), but also means you'll own a smaller fraction of your house.

ReFinance allows you to simultaneously compare 3 mortgages at a time. To facilitate comparisons, ReFinance assumes you are divvying up the same monthly payments. Depending on the mortgage (and depending on some other options that you can set), this monthly payment can: The primary output from ReFinance is a month-by-month (or a condensed year-by-year) listing of both the principal you've paid off, and how much money you have in your bank account. The sum of these represents the financial return on your monthly payments (in other words, it is the cash you'ld have if you sold your house and zeroed out your bank account).

ReFinance has a number of advanced features:

Are you looking for a loan calculator? If all you want to do is calculate the monthly payments for a possible mortgage, try this simple mortgage calculator

Glossary and tips

Mortgage: Interest
Enter the yearly interest rate for each of the three loans.
For example, 5.75 means 5.75%.
Actually, for the Plan ARM, this will be the starting interest rate that is used for the starting fixed-rate period.

Mortgage: Term
Enter the term of the loans (the number of months within which it must be repaid). Note that this if you make additional payments to principal, the loan will be repaid earlier.
Typically, longer term loans have larger interest rates.

Mortgage: Closing costs, from bank
Enter the closing costs (including points) of the loan (in dollars). This will be subtracted from your starting bank balance (which can be $0).

Mortgage: Closing costs, rolled into loan
Enter the closing costs (including points) of the loan (in dollars). This will be rolled into your loan -- which means your mortgage will be larger.

Note that you can split your closing costs between withdraw from bank and roll into loan, or you can allocate the entire closing costs to one of these two categories.

Mortgage: Consumption
Enter the per-month extra consumption expenditures.
This value represents money you choose to squander (say, on shoes for the children), rather then using to build up your bank balance or to pay down your principal.

Monthly expenditures
The disposition and size of your monthly expenditures will be a function of the mortgage payments, extra consumption, and extra savings ...
  1. Let x stand for Plan A, Plan B, or Plan ARM
  2. Call Cx your plan-specific extra consumption expenditures.

  3. Call M your mortgage payment (it is the same for all three plans).
    • You can either chose its value, or you can let the program chose a value.
    • If you let the program chose, it will chose the largest required mortgage payment of the three plans.

  4. Compute Dx, the difference between M and the actual mortgage payment required by the bank.
    • If you let the program chose M ...
    • one of the Dx will be $0.00
    • If you explicitly choose a low mortgage payment ...
    • none, one, two, or all of the Dx value can be less then zero.

  5. If Dx is greater then Cx, then

  6. If Dx is less then or equal to Cx, then
    • Cx will be your extra consumption
    • Wx = Cx - Dx will be removed from your savings each month.

  7. Regardless of the values of Cx and Dx, your extra savings will be saved each month (though some of this savings may be immediately withdrawn to pay for Wx!)

Mortgage ARM (adjustable rate)
An ARM is a two part loan. The first part, lasting between 3 and 7 years, typically has a low fixed interest rate. In the second part, which lasts for the remainder of the loan, the interest rate adjusts each year.
In real life, the new rate is often computed by adding a few percent to some macroeconomic measure (such as the average 30 year bond rate). In this program, the interest rate is based on the savings rate at the beginning of each year.
You can set the size of this adjustment, the maximum it can jump in a year, and its overall maximum.

A balloon loan is like an ARM, but the rate adjusts only once (at the end of the fixed rate period).

Note that an ARM loan is a gamble -- you usually get a low rate now, but you are betting that interest rates don't explode in a few years.

Mortgage ARM: fixed rate period
Number of months that a fixed rate will be used. After this many months, the interest rate will adjust (adjustments will occur every 12 months).
For example, to specify a 3/1 ARM, use 36 months.

Mortgage ARM: interest adjustment
Enter the premium, in percent. For example, 2 means 2%.
This premium is added to the bond-rate (at every 12 month interval), to compute the next year's mortgage interest rate.
For example, assuming a 3/1 ARM, if the bond-rate in month 60 is 4%, and your interest adjusment is 2, then (assuming no sudden jumps have occured) the next year's interest rate will be 6%.

Note: in most real loans, a macro indicator (such as the current 30 year Treasury Bond Rate) is used. For simplicity, this program uses the savings rate as a close approximation.

Mortgage ARM: maximum rise -- per year
Enter the maximum the interest rate can increase, in percent. For example, 2 means 2%.
This is used to prevent sudden jumps due to a very rapid rise in the bond-rate.

Note: for a ballon loan, set maximum yearly increase to 0

Mortgage ARM: maximum rise -- entire loan
Enter the maximum the interest rate can increase over the life of the loan, in percent. For example, 6 means 6%.
This is used to limit the maximum interest rate you pay. For example, if your starting rate is 4.5%, and the maximum total increase is 5%, then your yearly interest rate can never exceed 9.5%

Investment Strategy
You can choose between three investment strategies. These strategies direct what happens to refunds (primarily your income tax deductions due to interest payments) and overages (primarily the difference between the money you allocate to the mortgage, and the monthly mortgage payment required by the bank).

The starting principal is the amount of principal you currently have on the house. This is included strictly for informational purposes, it does not effect any calculation.

The remaining principal is what you owe -- it's the amount you need to borrow.

Starting bank balance
Your starting bank balance, in $. This can be $0.
Note: it is possible for your bank balance to drop below zero. The program assumes you'll make it up from somewhere (it will not reduce your principal automatically). Of course, your total asset value will be reduced when your bank balance is below $0.

Type of savings instrument
You can specify the type of savings instrument you use: Note that if you model an increasing tax-free interest rate, the bank-balance from the sequence of bonds will be lesser then from the normal bank account. However, it may be more realistic to assume the only tax free asset available to you is a long-term-fixed-rate bond.

Trend of the savings/bond interest rate
This program allows you to model the interest rate on tax-free bonds, on a month-by-month basis, using a quadratic equation in time:
     bond_rate = b0 + b1*t + b2*t*t
b0=3, b1=0, b2=0 A constant 3% rate.
b0=3, b1=0.5, b2=0 Start at 3%, increase 0.5% a year
b0=3, b1=0.5, b2=-0.0015 Start at 3%, increase 0.5% first year with smaller increases in later years, after 15 years rate is 6.6%
This interest rate is assumed to be tax-free. In contrast, the mortgage rates (both the main mortgage, and a possible home-equity loan) are before taxes.

Credit card premium
The credit card premium is used to determine your credit-card interest rate --
   credit_card_interest_rate = current_bond_rate + credit_card_premimum

If you bank balance drops below $0, then this credit_card_interest_rate will be used. The idea is that you need to borrow from an expensive source (i.e.; your credit card) to make up for running out of savings. That is, your negative balance will grow at this high interest rate, and not at the bank account/bond interest rate.

Marginal tax rate
The marginal income tax rate you pay. This should be the total of all federal, state and local income tax rates. Assuming you itemize your deductions, the program will compute this fraction of your interest payments, and add it to your bank account or your principal (depending on what strategy you chose).
Example: if your federal income tax rate is 27%, your state is %5, and your local is 2%, then the total marginal tax rate is 34%.
You should enter that as 0.34.

Total Assets
Total assets is the sum of your principal (the amount of your house you actually own) and money in your savings bank. Assuming no serious liquidity concerns, one goal is to maximize total assets at the end of the loan (or at a point in time you intend to sell the house).

Mortgage Payment
The size (in $ per month) of your mortgage payments.
In order to make it easy to compare loans, this amount will be paid for each loan plan, regardless of the payment required by the bank.
Thus, if the payment required by the bank is less then this value, the excess will be used to pay down the principal.
Conversely, if the required payment is greater then this value, the shortfall will be withdrawn from your bank account (note that your bank account can drop below $0).

If you leave this blank, the maximum first-month-mortgage-payment, of the three loan plans, will be used.

Note: your monthly expenditures are a function of the mortgage payment, your extra consumption, and your extra savings.

Extra Monthly Savings
You can add this much (in $ per month) to your bank account each month. This can complement, or substitute for, paying down your principal using a larger then required mortgage payment.

Home Equity Loan
As an optinal feature, this program allows you to take out a home equity loan (say, to pay a child's tuition). You can set the amount of this loan, when to borrow, how long to take pay it back, and the interest rate.

Home Equity Loan: Size of Loan
The amount of cash you need. The program will first withdraw cash from your bank account. If there is not enough in your bank, it will obtain the remainder using a home-equity loan. Note that your total asset value will be reduced by the amount you owe on an outstanding home-equity loan.

Home Equity Loan: Month it is needed
Enter the month you'll need to (possibly) take a home-equity loan.
If you do not intend to take a home-equity loan, leave this field blank.

Home Equity Loan: Months to pay it off
Enter the number of months needed to pay off the home equity loan.
Thus, if you take a home equity loan in month 70, and use 74 months to pay it off, your final home-equity loan payment will occur in month 144.

Home Equity Loan: Interest premium
Enter a premium, in percent. For example, 2 means 2%.
This premium is added to the bond-rate (at every 12 month interval), to compute the home-equity loan interest rate (note that this will be a fixed rate, good for the life of the home-equity loan).
For example, if the bond-rate in month 80 is 4.25%, and your home-equity loan interest adjusment is 1.5, then the home-equity loan interest rate will be 5.75%.

Home Equity Payments
If you choose to take out a home equity loan at some point, this value is used to pay it back ($ per month). As with the mortgage payment, extra amounts are used to pay down the home equity loan, and shortfalls are withdrawn from your bank account.
Leave this blank and the program will figure out a value (using the home-equity-loan payment computed for plan B).

A simple mortgage calculator

Remaining principal:
Interest rate
Length of loan (in years):


This ReFinance program is meant to give the user a general sense of the financial factors relevant to a decision to refinance a home. It is not guaranteed to be accurate. It might even be wrong in important details.

Therefore, this program is offered without any WARRANTY or ASSURANCE of reliability. If the program's conclusions should be flat out wrong, and cause you any kind of harm, we are NOT TO BLAME!

That said ... we've made a good deal of effort to check both the accuracy of the calculations and the relevant regulations, and we've used it in our own financial considerations. If you find bugs or other problems, please contact us (at