Refi Break-Even Ranger

Overview

Refinance decisions look simple and aren't. The advertised math ("save $220/month!") hides four traps: (1) closing costs and points must be recovered before you sell or move — break-even vs your actual horizon; (2) refinancing a 7-year-old loan into a new 30-year loan RESETS amortization, so lower rate ≠ lower lifetime interest; (3) the lowest rate often carries the highest upfront costs, so offer comparison must be net, not headline rate; (4) cash-out changes the loan amount and everything downstream.

This skill runs the real amortization math for both loans to a common horizon and returns: monthly savings, break-even months, interest paid over the horizon by each loan, net saving after upfront costs, equity-build delta, and a plain verdict (REFI / STAY / ONLY-IF-YOU-STAY). compare ranks multiple lender offers by net horizon saving — which routinely flips the "obvious" winner.

When to Use

• "Rates dropped — should I refinance?" (any rate-move question)
• "This lender says I'll save $200/month with $5,600 in costs — good deal?"
• Comparing 3 lender offers with different rates/points/closing costs.
• "Should I refi into a 15-year instead of another 30?"
• Cash-out refi vs HELOC sanity check (payment math side).
• "I might move in 2-3 years — does refinancing still make sense?"

Don't use for: purchase-mortgage shopping (different cost structure), reverse mortgages, or investment-property DSCR analysis (needs tax/rates context beyond scope).

How It Works — Numbered Steps

1. Gather: current balance, rate, monthly payment (P&I), payments remaining; the offer's rate, term, closing costs, points; and your honest stay-horizon in years.
2. Run one offer: python3 scripts/refi_ranger.py analyze --balance 280000 --current-rate 6.5 --current-payment 1768 --new-rate 5.25 --term 30 --closing 4200 --points 0.5 --horizon-years 7
3. Read BREAK-EVEN first: if it exceeds your horizon months, you LOSE money — verdict says STAY.
4. Read NET SAVING OVER HORIZON: the honest number — interest delta minus upfront costs at YOUR horizon, not the full term.
5. For multiple offers, build a JSON list and run compare — it ranks by net horizon saving and exposes the rate-vs-points tradeoff.
6. If the verdict is REFI, also price the same rate at 15/20-year terms (--term 15) — sometimes the same payment buys a far shorter clock.

The Math (what the tool does)

• Amortizing payment: P·r / (1 − (1+r)^−n) — same as lenders use.
• Break-even = (closing + points·loan) / monthly savings.
• Horizon comparison: run BOTH loans' amortization for horizon months; net saving = (current payments − current equity) − (new payments − new equity + upfront). This catches the clock-reset trap: a new 30-year loan amortizes slowly at first, so equity-build matters.
• Negative amortization guard: if a payment can't cover interest, the tool flags instead of silently computing nonsense.

Common Pitfalls

1. Break-even beyond the horizon. The #1 mistake: 40-month break-even with a 24-month stay = guaranteed loss. Always supply --horizon-years.
2. The 30-year reset. Dropping from 6.5% to 5.25% but restarting amortization at year 7 can still cost MORE lifetime interest if you keep paying for 23 more years. The horizon math exposes this.
3. Chasing headline rate. 4.99% with 1.5 points + high closing often loses to 5.375% with near-zero costs on an honest horizon — the compare table shows this in one line.
4. Forgetting PMI. If refi drops below 20% equity threshold changes PMI status, that's ±$100-300/month not in the headline — add it to closing or mentally to savings.
5. Rolling costs into the loan. Financed closing costs earn interest for 30 years; the tool treats them as upfront — if you finance them, your effective break-even stretches.
6. Extending term to "save". A 30→30 refi at lower rate saves; a 30→30 at same rate with 3 years elapsed "saves" monthly only by re-lengthening the loan. Compare terms honestly.
7. Ignoring rate-shop window. Multiple mortgage applications within a ~14-45 day window count as ONE credit inquiry — get all offers inside it.

Example

Borrower: balance $280k @ 6.5%, paying $1,768/mo, ~7 years left on the job,
maybe moving in ~7 years... but let's check 2 years too.

$ refi_ranger.py analyze --balance 280000 --current-rate 6.5 --current-payment 1768 \
    --new-rate 5.25 --term 30 --closing 4200 --points 0.5 --horizon-years 7
New payment $1,546 → saves $221.83/mo; upfront $5,600
Break-even: 25 months. Interest over 84 mo: $121,867 → $97,360
NET SAVING over horizon: $7,160 → REFI (only if you stay 25+ months)

Same offer, 2-year horizon: verdict flips to STAY (−$11,162).

Three lenders: compare ranks CU B 5.375%/$2,500 closing FIRST (net $9,039)
above Bank C's flashy 4.99%/$10,700 (net $4,536) — points eat the win.

References

• references/refi-decision-guide.md — the decision framework, horizon honesty, PMI/term interactions, cash-out chapter, negotiation levers, and the rate-shop credit-window rule.
• references/amortization-math.md — formulas, worked examples, clock-reset trap quantified, equity curves, and how points pricing maps to break-even.