Methodology and assumptions

Mortgage payment and amortization

Used by Down-payment optimizer, Rate comparison, Points vs. principal · v1.3.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

Principal and interest use the standard level-payment annuity formula: payment = P x r / (1 - (1 + r)^-n), where P is the financed amount, r is the annual note rate divided by 12, and n is the number of scheduled payments.

Amortization runs one month at a time. Interest for the month is the beginning balance multiplied by the monthly rate, the remainder of the scheduled payment reduces principal, and any extra principal you model is applied after the scheduled payment in the same month.

• Interest accrues monthly on the beginning balance; daily accrual and servicer-specific posting dates are not modelled.
• Payments are assumed to be made on time, in full, on a monthly schedule.
• Escrowed taxes, insurance and HOA amounts are excluded from principal and interest and shown separately where they are modelled at all.

Mortgage insurance (PMI and FHA MIP)

Used by Down-payment optimizer, Points vs. principal · v1.2.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

Conventional private mortgage insurance is modelled as an annual percentage of the loan balance, charged monthly, and removed when the scheduled balance reaches 80% of the original purchase price.

FHA mortgage insurance is modelled with an upfront premium financed into the loan plus an annual premium charged monthly. Where the down payment is at least 10%, the annual premium is modelled as ending after 132 payments; below 10% it is modelled for the life of the loan.

Points, lender credits and closing costs

Used by Rate comparison, Points vs. principal · v1.1.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

One discount point is conventionally 1% of the loan amount, but the calculators use the dollar cost and rate you actually enter for each offer rather than assuming a fixed relationship.

Points paid in cash reduce the cash you keep. Points financed into the loan increase the financed balance. Lender and seller credits reduce cash to close and are not treated as a direct principal payment unless you model them that way.

Principal curtailments and recasting

Used by Points vs. principal · v1.1.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

A curtailment reduces the balance in the month it is applied and shortens the payoff date; the required monthly payment is unchanged unless a recast is modelled.

When a recast is modelled, the payment is recomputed from the balance after the curtailment over the remaining scheduled term, and any recast fee you enter is treated as cash out at that time.

Investment growth, liquidity and cash timing

Used by Down-payment optimizer, Rate comparison, Points vs. principal · v1.3.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

Scenarios are compared on a common monthly outlay. When a scenario costs less than the reference outlay, the difference is invested; when it costs more, the difference is withdrawn from retained cash.

The investment return you enter is treated as an after-tax annual rate and is compounded monthly at (1 + annual)^(1/12) - 1. Contributions and withdrawals are applied at month end.

Liquidity is reported as the modelled investment and cash balance, compared with the minimum reserve you set.

Tax treatment

Used by Down-payment optimizer, Tax panel · v1.2.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

The tax estimate compares itemised deductions (modelled mortgage interest, mortgage insurance where deductible, and state and local taxes subject to the cap) with the standard deduction for your filing status, and values only the excess at your estimated marginal rate.

Mortgage interest is limited to the modelled acquisition-debt limit. Mortgage-insurance deductibility is phased out over the modelled income range rather than switched on and off.

Where you enable reinvestment of tax savings, the estimated annual saving is deposited into the investment balance once every twelve months.

Breakeven solvers and rounding

Used by Down-payment optimizer, Points vs. principal · v1.2.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

Breakeven investment return is found by bisection: the difference in ending net position between two scenarios is evaluated across a bracketed range of returns until the sign change is located within a tight tolerance.

Traditional payment breakeven divides point cost by monthly payment savings. Principal-adjusted breakeven instead compares the position reached by applying the same funds to the balance.

Internal arithmetic is kept in full floating-point precision; rounding to whole dollars or two decimals happens only at display time, so a displayed total may differ by a few cents from adding the displayed parts.

Home appreciation, inflation and refinancing

Used by Down-payment optimizer, Rate comparison · v1.1.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

Home value grows at the annual appreciation rate you enter, compounded monthly. Appreciation affects modelled equity and net position but not the loan schedule.

Where a refinance or sale is modelled, closing costs are treated as cash out at that time and the new schedule begins from the then-current balance.

Benchmark rate data

Used by Rate comparison, Guides · v1.1.0 · effective 2026-08-02 · last reviewed 2026-08-02 by Internal modelling review

Benchmark rates are national weekly survey averages published by Freddie Mac's Primary Mortgage Market Survey. They are displayed with the survey week, the time they were last verified, and a link to the source.

A benchmark average is not a personalised lender offer and is not used to imply an available rate. Comparisons use the lender quotes you enter.