Mortgage Calculator Refinance & Rate Incentive Affordability & DTI
Quantitative Refinance & Prepayment Model

Mortgage Refinance & Rate Incentive Calculator

Calculate your monthly payment reduction, break-even months, lifetime interest savings, and the exact Wall Street rate incentive (w - r) that drives borrower refinancing behavior.

Current Mortgage Details

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yrs

New Mortgage Parameters

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Typically 1% - 2.5% of loan balance for appraisal, title, and origination fees.

Refinance Decision Summary Refinance Incentive (w - r): 150 bps
Strong Refinance Incentive (+150 bps). Break-even is achieved in 13.0 months with $386/month in cash savings.
Monthly Payment Savings $385.99/mo
Break-Even Horizon 13.0 months
Annual Cash Saved $4632/yr

Current Mortgage

Principal & Interest (P&I) $2253.42
Remaining Interest $
Rate & Remaining Term 7.25% / 27 yrs

New Refinance Loan

Principal & Interest (P&I) $1867.43
New Lifetime Interest $
Lifetime Interest Saved $

📊 How Wall Street Prepayment Models View Your Loan

In Chapter 2 and Chapter 7 of Mortgage Markets in the Age of AI, we explore how MBS quantitative desks measure the Rate Incentive \( w - r \) and the Dollar Savings Effect:

Annual Dollar Savings = UPB × (w - r) = $320000 × (7.25% - 5.75%) = $4800/year

Borrowers with larger loan balances refinance at lower rate incentives because their absolute dollar savings outweigh the fixed closing transaction friction. This creates the famous S-curve response in MBS CPR prepayments!