Methodology · United States
How we calculate
Every formula behind every calculator on this site, written out. You should not have to trust a number you cannot check, and a calculator that hides its arithmetic is asking you to do exactly that.
Most calculators are a black box. You type numbers in, a figure comes out, and the only thing supporting it is the confidence of the design. That is a poor deal on a decision this size, and it is why estimates that disagree by tens of thousands of dollars can both look equally authoritative.
So here is ours, in full: the arithmetic, the choices inside it, and the points at which it stops being reliable. If you find an error in it, it is an error worth telling us about.
How is net proceeds calculated?
Net proceeds is a single subtraction. Everything difficult about it is deciding what belongs in the middle term, not the arithmetic.
net proceeds = sale price − total cost of sale − mortgage payoff
- total cost of sale
- commission + transfer tax + title, escrow and attorney fees + prorated property tax + concessions + repairs and other costs
- commission
- sale price × commission rate ÷ 100
- transfer tax
- sale price × transfer tax rate ÷ 100
Commission and transfer tax scale with the sale price, so they are taken as rates. Every other cost is a flat amount, because it does not scale — a title company charges what it charges whether the home sells for $300,000 or $600,000.
The result can go negative, and we render it as a negative rather than as a payout. A negative result means the sale does not cover its own costs plus the loan, and the difference has to be brought to closing in cash.
The loan payoff is subtracted last and kept on its own line, because it is not a cost of selling. It is debt you already owed. Netting it in with the fees is what makes some calculators tell a seller with a large mortgage that selling is expensive, when what is actually happening is that they are repaying themselves.
How is a monthly mortgage payment calculated?
The standard level-payment amortization formula. Every payment is identical, and the split between interest and principal shifts across the term.
payment = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P
- the principal outstanding today, not the original loan amount
- r
- the monthly rate — the annual rate divided by 100, then divided by 12
- n
- the number of months remaining on the term
When the rate is zero the formula divides by zero, so that case is handled separately as principal ÷ months. It is not a realistic mortgage, but it is a realistic thing for someone to type into a field, and returning a broken value there would undermine trust in every other number on the page.
This is principal and interest only. If you escrow for property tax and insurance, your actual bill is higher, and a recast does not reduce the escrow portion at all.
How is the recast comparison calculated?
The comparison is the point of the tool, so it is computed as two full amortization schedules rather than as a formula, and the two are run against the same balance and the same rate.
balance after lump sum = current balance − lump sum recast → payment recalculated over the SAME remaining term keep paying → payment unchanged, term runs SHORTER
- recast payment
- the payment formula applied to the reduced balance, over the original remaining term, at the unchanged rate
- keep-paying term
- the reduced balance run down month by month at the payment you make today, until it clears
- interest given up
- total interest under the recast − total interest under keep-paying
Both schedules are simulated month by month rather than solved in closed form. The reason is the last payment: it is almost always a partial one, and simulating gets that exactly right without special-casing it. The loop carries a hard stop at 1,200 months so a rounding pathology cannot spin forever.
A payment that does not cover the first month's interest can never amortize the balance, so that case returns an unbounded term rather than a misleading finite one.
The "interest given up" figure is what almost every other recast calculator omits, and it is never negative. Recasting cannot save more interest than keeping your payment does, because the lump sum is identical in both cases and the recast simply spends the benefit on a lower payment instead of an earlier payoff.
How is the taxable gain on a home sale calculated?
Two subtractions and an exclusion. The ordering of the third step is where most calculators go wrong.
gain = (sale price − selling costs) − adjusted cost basis adjusted cost basis = purchase price + improvements − depreciation taxable gain = gain − exclusion applied
- exclusion applied
- the lesser of the Section 121 cap and the gain that remains after depreciation recapture is removed — $250,000 single, $500,000 married filing jointly, and zero if the ownership and use test is not met
- depreciation recapture
- the lesser of the gain and the depreciation claimed
Depreciation does two things at once, and the order matters. It lowers your basis, which raises the gain, and it is itself never excludable under Section 121. So recapture is taken off the top and only the remainder is measured against the exclusion. Applying the exclusion first would shelter money the rules do not allow you to shelter, and would tell a former landlord they owe nothing when they do.
Your mortgage appears nowhere in this. Debt has no effect on gain, which is why a seller can receive very little cash and still owe tax on a large one.
A loss returns a taxable gain of zero rather than a negative number, because a loss on a home you lived in is not deductible and does not offset anything.
How is a buyer’s cash to close calculated?
A sum and two credits — but with the two kinds of money kept deliberately apart.
cash to close = down payment + closing costs + prepaids − credits closing costs = lender fees + title and recording + transfer tax credits = earnest money + seller credits
- down payment
- purchase price × down payment rate ÷ 100
- lender fees
- loan amount × lender fee rate ÷ 100 — a share of the loan, not of the price
- loan amount
- purchase price − down payment
Prepaids and escrow reserves are added to the cash required but excluded from the closing-cost total, and from the percentage quoted beside it. They are the buyer’s own property tax and insurance collected early, not a price paid to transact. Folding them in is the most common way a published "closing costs are 2–5%" figure misleads, and it makes two lender quotes impossible to compare.
Earnest money is subtracted rather than added. It was paid when the offer was accepted and is credited at closing, so it lowers what remains to bring.
The result can go negative when credits exceed what is owed. We render that as a negative rather than as zero, though lenders cap how much of a credit can actually be refunded.
How is the cost of waiting calculated?
Three full amortization schedules against the same loan, differing only in when the extra payment starts.
for a delay of 0, 12 and 60 months: run the loan at the scheduled payment for the delay then amortize what is left at (scheduled payment + extra) cost of waiting = interest saved starting now − interest saved starting later
- interest saved
- total interest with no extra payment, less total interest for that scenario
- saved per dollar
- interest saved ÷ total extra dollars contributed — an average across all the dollars, not the marginal value of one dollar sent late
The three start dates are fixed rather than editable. They are demonstrating a claim, not offering a setting, and the claim is that the decay between them is steeper than people expect.
The second answer runs the other way: given a target payoff date, it finds the smallest extra payment that reaches it, by bisecting over the same schedule. Months-to-payoff only ever falls as the extra payment rises, so sixty halvings of the range narrow it far below a cent.
That figure is rounded up to the next whole dollar and then re-checked against the schedule. Rounding down would look tidier and would leave you a month short of the deadline you asked for.
The limits
Where these estimates stop being reliable
We do not assert rates we cannot source
There is no 50-state rate table behind any of this. Transfer taxes, title customs and proration conventions vary by state, county and sometimes city, and a table we cannot keep current is worse than no table — it would be wrong silently. Every state-varying figure is an editable input with a national-ballpark default, clearly marked as one.
Defaults are starting points, not estimates of your situation
The numbers a calculator loads with are there so the page is useful before you type anything. They are not a prediction. The moment you have a listing agreement, a payoff quote or a draft settlement statement, those figures replace ours and the output becomes worth planning around.
We round to whole dollars
Cents are noise at these magnitudes and they make a column harder to scan. Totals are computed at full precision and rounded only for display, so the arithmetic is never done on rounded inputs.
We compute a gain, never the tax on it
These are different questions and we answer only the first. The capital gains calculator works out how much of a sale is taxable, given your basis, your improvements, any depreciation claimed and your filing status. What is actually owed on that figure depends on your bracket, your state, the net investment income tax and the rest of your return — so we stop, and say so, rather than producing a number that would look authoritative and be wrong. Net proceeds, separately, is cash at closing and is not a gain at all.
Nothing here is advice
These are estimates for orientation. They are not financial, tax or legal advice, and no calculator — including this one — knows your contract.
Your numbers
The arithmetic runs on your device
Every calculation above happens in your browser. There is no server that sees your sale price, your loan balance or your payoff amount, because there is no server in the loop at all — the page ships the arithmetic and runs it locally.
There are no accounts, nothing is saved, and nothing you type is transmitted anywhere. We do record anonymous, cookieless page views so we can tell which tools people find useful. That is the whole of it.