Kavivero turns your loan details into six layered analyses. You can read each one independently — they share a discount rate and a rate-trajectory model but are otherwise self-contained.
1. Break-Even Analysis (NPV-Adjusted)
How long until refinancing pays for itself — discounted to today.
The naive break-even formula divides closing costs by monthly savings. That ignores the time value of money and PMI elimination, both of which can shift the answer by years.
Kavivero solves for the month at which the cumulative present value of monthly savings exceeds closing costs:
NPV(t) = Σᵢ₌₁ᵗ (savings_i ÷ (1 + r/12)^i) − closing_costs- ✓Includes PMI elimination in monthly savings when applicable
- ✓Models rolling closing costs into loan balance (effective savings drop by closing × new_rate / 12)
- ✓Compares break-even against your stated stay-in-home horizon
2. Rate Trajectory (Monte Carlo)
Probabilistic forecasts for 30-year mortgage rates 3, 6, and 12 months out.
We anchor expected mortgage rates to the 10-year Treasury yield (typical spread: 150–250 bp) and model the future path with a 1,000-path Monte Carlo simulation. Drift comes from the slope of the yield curve; volatility comes from 90-day historical daily-change standard deviation of the 30-year fixed rate.
rate_{t+1} = rate_t + drift + σ · Z, Z ~ N(0,1)- ✓Yield-curve signal: normal, flat, mildly inverted, or inverted
- ✓Outputs P25/P50/P75 forecast at 3, 6, and 12 months
- ✓"Wait vs act now": expected NPV of waiting compared to refinancing today
3. Cash-Out Equity Analysis
Effective interest rate on extracted equity vs. HELOC and personal loan alternatives.
A cash-out refinance changes both your rate and your balance. The effective rate on the cash extracted is not the new mortgage rate — it is the marginal cost of borrowing more dollars at a different rate:
effective_rate = (new_rate · new_balance − old_rate · old_balance) ÷ cash_out- ✓Caps cash-out at 80% LTV (conventional) or 85% (FHA)
- ✓Flags PMI re-introduction risk if new LTV > 80%
- ✓Compares against typical HELOC and personal loan rates
4. ARM-to-Fixed Conversion
Quantifying the peace-of-mind premium of locking in a fixed rate.
Even if expected ARM payments are lower than fixed, payment volatility has cost. We model best, expected, and worst-case ARM trajectories using your caps and the rate-trajectory simulation, then add a certainty premium proportional to payment-stream variance:
NPV_ARM + certainty_premium vs NPV_fixed- ✓Honors your initial, periodic, and lifetime caps
- ✓Uses the same Monte Carlo paths as Framework 2 for index projections
- ✓Risk-aversion parameter is configurable; default is moderate
5. PMI Removal Timing
The cheapest path to drop PMI: wait, reappraise, pay down, or refinance.
PMI auto-cancels at 78% LTV against original value, and is requestable at 80%. Lender appraisals against current market value can short-circuit the wait. We compute NPV for all four paths and rank them.
best = argmin(NPV_wait, NPV_reappraisal, NPV_extra_payments, NPV_refi)- ✓Uses FHFA HPI to estimate current market value if not user-provided
- ✓Computes months-to-80% under your existing amortization and any extra principal
- ✓Bundles PMI savings into the refi-path NPV when refinancing also drops the rate
6. Term Optimizer
15- vs 20- vs 30-year terms — including the investment alternative.
Comparing total interest is misleading because dollars in year 30 are not dollars today. We discount each term's payment stream and add the opportunity cost of the higher payments shorter terms require:
investment_FV = (PMT_15 − PMT_30) · ((1 + r_market/12)^n − 1) ÷ (r_market/12)- ✓Solves for the breakeven market return (where 30yr + invested difference = 15yr)
- ✓Quantifies optionality value of a 30yr loan with voluntary extra payments
- ✓Discount rate and assumed market return are configurable in Settings
Disclaimers
Refinance projections use current market rates and your inputs. Actual rates, closing costs, and loan terms depend on your full financial profile and lender underwriting.
This tool provides mathematical analysis only. It is not financial or lending advice. Consult a mortgage professional before making refinancing decisions.
Rate forecasts are probabilistic projections. Future mortgage rates are inherently unpredictable. No guarantee of future rates is expressed or implied.
Home value estimates use FHFA HPI data at the state/MSA level. Property-specific value depends on factors a formal appraisal would capture.