How MortgageWhy calculates its estimates

Payment-change checker

Each annual change is divided by 12. The shortage is divided by the selected repayment months. Those components are added and compared with the actual old-to-new monthly payment change. A difference within $2 is treated as normal statement rounding; larger differences are marked for review.

Monthly mortgage and escrow check

The monthly check adds principal, interest, escrow, mortgage insurance, and fees, then compares that allocation with the payment credited. It also checks that beginning principal minus principal applied equals ending principal. Exact accounting comparisons allow two cents for currency rounding.

When entered, a simple interest estimate equals beginning principal multiplied by the annual rate and divided by 12. Differences greater than $2 are shown for confirmation because payment timing, adjustable rates, modifications, and loan terms may legitimately produce another amount. Expected escrow deposits and disbursements also use a $2 comparison tolerance.

A fee or suspense balance is shown for review but is not labeled improper. A saved monthly summary is optional, remains in local browser storage, and is not used by the calculation engine.

Monitoring planner

The planner turns dates entered by the homeowner into a local checklist for mortgage statements, property-tax bills, insurance renewals, annual escrow analyses, mortgage-insurance reviews, and servicing transfers. Due-soon and overdue labels are date comparisons only. Nothing runs in the background and MortgageWhy does not connect to a bank, servicer, insurer, or tax authority.

12-month escrow analysis checker

The checker uses the entered computation-year starting month and expands each recurring item into the applicable payment months. Its base monthly collection annualizes only the ordinary recurring payments scheduled in that computation year, so an item that begins or ends midyear is not collected for inactive months. Supported two- and three-year items are spread across their applicable funding cycle. It creates 12 month-end balances, applies the deposit before bills entered for that month, and compares the lowest balance with the selected cushion.

A shortage is reported when a nonnegative current balance is below its target. A deficiency is reported only when the entered current balance is actually negative. The repayment view separately enforces the federal shortage and deficiency option matrix or labels a different schedule as a voluntary what-if. Surplus language depends on payment status and the $50 threshold.

This follows the structure of aggregate escrow analysis but cannot reproduce information that was not entered, including precise transaction dates, state limits, servicer timing conventions, loan-document provisions, or corrections.

Annual statement review and action report

The statement review checks whether the annual escrow statement's numbers are internally consistent and identifies what to confirm with the servicer. It recomputes the entered balance roll-forward, checks the computation-year dates and selected federal decision rules, and identifies missing facts. Its four outcome labels describe the information entered; they are not legal conclusions. Uploaded PDFs and images are read in the browser and every extracted figure must be confirmed before use.

Mortgage-servicing rules checker

The rules checker selects a structured federal rule entry by topic. Each entry records its citation, official source, source-check date, evidence needed, and key exceptions. If payment status, loan type, property state, or mortgage-document terms could change the answer, the tool identifies that missing information instead of producing a compliance conclusion. State law and loan-program rules are not yet encoded.

Servicer letter generator

The generator prepares an editable information request, notice of error, or combined draft from facts supplied by the homeowner. It requires confirmation of the servicer's designated address, never sends the letter, and leaves the user responsible for accuracy, attachments, delivery records, and deadlines.

Property-tax assessment review

Five deterministic screens compare user-confirmed inputs: assessor market value against valuation evidence; pre-exemption assessed value against a confirmed local assessment ratio; subject assessed value per square foot against the median of at least two entered same-cycle comparable assessments; and eligible exemptions or property-record mismatches; and assessor market value against the range mechanically indicated by user-entered comparable sales. Each screen returns a possible ground, no indicated ground, or missing-information result with a separate confidence label.

The optional tax-change decomposition separates the entered annual bill change into taxable-value, effective-rate, special-assessment, and unreconciled components. When explicit effective rates are omitted, they are derived from the entered annual bill less entered special assessments, divided by taxable value. The assessment-cap screen applies only when the homeowner confirms a cap, prior limited value, annual percentage, proposed market value, and rate. It does not encode portability, reset events, classifications, or local exceptions.

The default 5% value-gap and 10% comparable-premium settings are visible screening thresholds, not legal standards. The expected assessment ratio and filing deadline must be confirmed from official local guidance. The optional tax-impact estimate applies the current effective tax rate to an entered proposed taxable value and therefore may differ from a real corrected bill that includes caps, exemptions, special assessments, fixed charges, or rate changes. The generated letter is supporting material and does not replace a locally required petition, portal submission, fee, or hearing request.

The assessment-review offer in the escrow result appears only when the property- tax increase is at least $25 per month and is not smaller than another positive recurring escrow-cost driver. Shortage repayment is excluded from this dominance test because it is a temporary financing component rather than an underlying bill.

Payment-change routing and private share card

After the existing escrow calculation runs, a deterministic router gives an unexplained difference priority over cost-reduction paths. Otherwise it compares only positive entered tax, insurance, shortage, and other-escrow changes. A clear largest driver determines the first next step; changes within the calculation's rounding tolerance use a combined-driver result. The property-tax path continues to require the material tax-driver offer threshold described above. The router does not change the calculation or decide that a bill or servicer action is wrong.

The optional share card is generated in the browser from fixed categorical result language. Its default model contains no entered amount, address, account information, property fact, document detail, or calculation date. MortgageWhy does not upload or publish the card automatically.

The planned $29 property-tax packet is an interest test, not a product for sale. It appears only after a possible ground supported above low confidence and is suppressed for modeled no-immediate-cap-savings results, rate-or-fixed-charge- only increases, and entered purchase or new-construction reset events. The control visibly states that nothing is available for purchase and collects no email or payment information.

Biweekly payment comparison

The comparison models contractual biweekly crediting, a withdrawal plan that holds half-payments until a full monthly payment is available, semimonthly payments, and a monthly payment plus one-twelfth extra principal. Each scenario derives the scheduled payment from the entered principal, rate, and remaining term, then applies its stated crediting frequency, adds plan fees, and compares payoff time, interest, and net savings. It is a planning comparison; the loan agreement and servicer's actual crediting practice control.

Pre-closing escrow guide

The guide organizes entered loan type, escrow requirement, estimated taxes and insurance, initial deposits, prepaids, cushion, waiver pricing, and reserves. It highlights questions to ask but does not decide whether escrow is legally required or whether a waiver is economically best.

Shortage, tax, insurance, and surplus tools

• August 13, 2026: Added monthly whole-mortgage consistency checks.
• August 13, 2026: Added the plain-English mortgage escrow rules guide.
• Shortage repayment = remaining shortage ÷ repayment months.
• Monthly tax change = annual tax change ÷ 12.
• Monthly insurance savings = annual premium savings ÷ 12.
• Known surplus exposure = tax increase + insurance increase.

Refinance calculations

Current public break-even calculator

The current public refinance calculator is a narrow screening tool. It compares fixed-rate principal-and-interest payments and calculates a simple cash-cost recovery estimate by dividing entered closing costs by positive monthly principal-and-interest savings, then rounding up to the next whole month. It also estimates the full-term difference between the current loan's remaining interest and the proposed loan's interest plus entered closing costs. It does not use the Decision Report engine described below and does not produce an overall refinance conclusion. It does not model APR, points, lender credits, escrow, mortgage insurance, tax effects, opportunity cost, or cash-out proceeds.

Decision Report calculation map

The production composer applies the following 17 calculation and decision stages in this order. Each link points to the public formula, boundary, or decision rule that governs that stage; the map does not create a second copy of those rules.

1. Validate the report case and its evidence: Evidence, conditional thresholds, and result labels
2. Check whether each result can be compared: Evidence, conditional thresholds, and result labels
3. Build the current-loan schedule: Fixed-rate schedules, rounding, and dates
4. Allocate cash and financed closing costs: Cash, financed costs, and the two recovery measures
5. Build the proposed-loan schedule: Fixed-rate schedules, rounding, and dates
6. Apply the selected payment scenario: Scenarios, payoff charges, and the same-term alternative
7. Apply active payoff and prepayment charges: Scenarios, payoff charges, and the same-term alternative
8. Keep escrow and mortgage insurance separate: Cash, financed costs, and the two recovery measures
9. Build both cumulative cash-outflow paths: Cash, financed costs, and the two recovery measures
10. Find every cash-flow cost-recovery crossing: Cash, financed costs, and the two recovery measures
11. Compare complete modeled outflows: Cash, financed costs, and the two recovery measures
12. Compare the selected holding date: Cash, financed costs, and the two recovery measures
13. Build the same-remaining-term alternative: Scenarios, payoff charges, and the same-term alternative
14. Summarize payoff dates and interest plus costs: Scenarios, payoff charges, and the same-term alternative
15. Classify the three result axes: Evidence, conditional thresholds, and result labels
16. Solve eligible unknown-value thresholds: Evidence, conditional thresholds, and result labels
17. Classify the ten decision traps: Decision traps

The nominal, undiscounted scope applies across every stage in this map.

Fixed-rate schedules, rounding, and dates

For starting principal P, monthly note rate r, and payment count n, the unrounded contractual payment is P × r ÷ (1 − (1 + r)⁻ⁿ). A zero-rate loan uses P ÷ n. The confirmed annual rate is converted to an exact monthly ratio rather than a shortened decimal. The contractual payment and each month's interest are rounded half up to the nearest cent, balances remain integer cents, and the last payment is adjusted to clear the remaining balance exactly. The payoff date is the scheduled due date of that final adjusted payment.

Current and proposed loans keep separate comparison dates and first modeled payment dates. Monthly dates are added from the original date anchor, preserving its day when possible and otherwise using the target month's last day. A selected holding date is a comparison date, not an assumed payoff event.

Cash, financed costs, and the two recovery measures

In the supported no-cash-out case, proposed principal equals current remaining principal plus net financed costs. Cash-paid items enter the refinance cash ledger at their confirmed time; financed items enter proposed principal and are not added again as cash. Points, lender credits, payoff charges, accrued or prepaid interest, recurring charges, and extra-principal payments each follow their own confirmed funding and timing. New escrow funding and an old-account refund or transfer stay on a separate liquidity ledger rather than becoming a loan cost.

Monthly payment relief is current contractual principal and interest minus the selected scenario's recurring principal-and-interest payment. It is not an all-in housing-payment comparison. The engine keeps two other measures separate:

• Cash-flow cost recovery is the first month when cumulative modeled current-loan outflows minus cumulative modeled refinance-path outflows become nonnegative. Every later reversal is retained. This is a payment and cash-outflow measure, never an overall break-even. In the audited synthetic reference case, month 19 is cash-flow cost recovery only.
• Balance-adjusted net position adds the current remaining balance and subtracts the proposed remaining balance from the cash-flow position at the same date. The first nonnegative month is the balance-adjusted break-even; later reversals remain visible, so the first crossover is not a promise that the position stays positive.

Full-contract net compares complete modeled current and proposed outflows through the later payoff date. A positive value means the proposed path costs less, zero is a tie, and a negative value means it costs more. The separately worded lifetime cost difference uses the opposite sign; it is not another calculation.

Scenarios, payoff charges, and the same-term alternative

The engine can compare contractual minimum payment, continuing the current payment when it is high enough, a confirmed recurring extra-principal amount, and an optional dated lump sum. Extra principal is capped at the remaining balance, unused excess is disclosed, and the final adjusted payment is never presented as a new recurring payment.

A confirmed current-loan payoff charge can apply when the refinance closes. A proposed-loan prepayment penalty applies only to a modeled early full payoff on or before its confirmed finite expiration. Ordinary contractual maturity does not trigger that penalty, and a holding horizon alone is not a payoff. Unknown charge terms are not assumed to be zero.

When the proposed term is longer than the current remaining term, the engine also calculates a same-remaining-term alternative. It changes only the proposed term, keeps the entered proposed rate, principal, and confirmed cost treatment, and uses contractual minimum payment. It is a deterministic hypothetical for comparing the term choice, not evidence that a lender offers those terms.

Evidence, conditional thresholds, and result labels

Each report fact keeps an evidence state such as user provided, document confirmed, needs confirmation, calculated, assumption, unknown, conflicting, or unsupported. A consequential unresolved fact blocks only the outputs that depend on it; the engine does not replace a missing amount with zero or select the more favorable of conflicting values.

A conditional threshold is available only when exactly one active unknown is an eligible scalar money amount whose unknown evidence state and provenance are preserved, while its cents unit, cash-or-financed treatment, trigger, timing, affected outputs, and closed minimum-to-maximum cent range are confirmed. Every cent in that range must pass ordinary and cross-field validation; the engine never clips an invalid range. It reports every affected axis boundary and every outcome interval, including multiple boundaries when an axis is non-monotonic. Approximate rounded shorthand is used only when the conservative rounded boundary remains strictly inside the confirmed range. Ineligible unknowns, two or more active unknowns, or incomplete range terms are not comparable. Assumption-backed threshold output remains conditional and can never become a confirmed favorable result.

The bottom line keeps three axes separate: recurring payment change, selected- horizon balance-adjusted position, and full-contract net. A confirmed favorable result requires positive payment relief, a positive selected-horizon position, a nonnegative full-contract result, and no active unresolved evidence. Mixed axes are a tradeoff to review; no favorable modeled axis is no benefit. An unknown holding horizon withholds the holding-period conclusion rather than inventing one. Unsupported structures and not-comparable evidence states are named instead of being forced into a winner label.

Decision traps

The report contract checks ten decision traps: term reset; financed costs; points and lender credits; cash to close; PMI or another guarantee charge; escrow timing; payoff or prepayment charges; rate-lock status; missing evidence; and conflicting evidence. Each trap retains its evidence and affected result, shows a present, absent, unknown, conflicting, or unsupported state, and maps a real gap to a specific confirmation question. Missing evidence cannot be overridden by a payment or cost figure that happens to look favorable.

Nominal, undiscounted scope

All Decision Report cash and debt comparisons are stated in nominal dollars and are undiscounted. The engine does not calculate present value, income-tax effects, investment return, inflation, or opportunity cost. Those items are excluded, not silently treated as zero, equal, or irrelevant. No engine output is labeled NPV, tax-adjusted savings, or economic value.

When a borrower-facing Decision Report is released, this scope statement and the applicable exclusions must appear beside the affected results on screen, mobile, print, and copied text. That result placement belongs to the report experience and is not claimed by this methodology page today. The CFPB's September 2020 Should I refinance? handout (p. 2) provides general context: a new loan can lower the monthly payment yet cost more in total when its term is longer. The CFPB did not define, review, or endorse MortgageWhy's formulas or conclusions.

New-construction tax estimate

Projected annual tax equals expected assessed value multiplied by the entered effective rate, less entered annual exemptions. The possible undercollection is the positive monthly increase multiplied by the number of months entered. It is a planning scenario, not a county assessment forecast.

PMI planner

Scheduled balances use fixed-rate amortization. The planner identifies the first scheduled month at or below 80% and 78% of the original property value. Federal cancellation and termination rules have additional requirements, and FHA, VA, USDA, lender-paid, or nonconforming insurance can follow different rules.

Testing and corrections

Financial calculation functions are isolated from the interface and covered by repeatable unit tests, including increases, decreases, alternate repayment periods, invalid inputs, amortization, and monthly running-balance scenarios. Results should still be checked against official documents before acting.

Change history

• September 2, 2026: Mapped every Decision Report production-composition stage to its governing public methodology section.
• August 30, 2026: Published the audited Refinance Decision Report engine methodology, its nominal and undiscounted scope, and the separation from the current public break-even calculator.
• August 17, 2026: Added the 2026 escrow-shortage article, cross-page trust messaging, curated related tools, a categorized Resources index, and the desktop Tools menu.
• August 17, 2026: Added the all-clear stopping point, three Act tools, internal-consistency wording, and privacy-safe journey analytics.
• August 16, 2026: Connected payment explanations to the exact escrow checker, added the four-stage homeowner journey, and corrected negative-balance deficiency plus cushion-shortage collection.
• August 14, 2026: Added deterministic payment-change routing, a client-only privacy-safe share card, property-tax false-positive gates, and a transparent packet interest test.
• August 14, 2026: Added tax-change decomposition, expanded property facts, comparable sales, assessment-cap screening, and a material tax-driver offer threshold.
• August 14, 2026: Added the private property-tax assessment review and printable appeal-kit support.
• August 13, 2026: Added statement review, consumer action reports, and local letter drafting.
• August 13, 2026: Added monitoring, pre-closing, biweekly, and federal rules tools.
• August 13, 2026: Corrected escrow terminology, dates, recurring items, and the federal option matrix.
• August 12, 2026: Added the initial 12-month escrow projection methodology.
• August 12, 2026: Added new-construction and PMI planning methodology.
• August 11, 2026: Added shortage, surplus, tax, insurance, and refinance tools.