How Marian’s rate works

Marian is a mortgage whose rate can only go down. When market rates fall far enough, the rate resets lower automatically, down to a floor. It never goes up. This page explains how the rate works, how we price it, and how it compares with refinancing.

The short version

• Every standard mortgage rate includes a charge for the borrower’s right to refinance.
• Everyone pays that charge. Borrowers only get its value by refinancing, which costs money and effort and requires qualifying again.
• Many borrowers refinance late, pay closing costs more than once, or never refinance at all.
• Marian delivers the rate drop automatically, at no cost to the borrower, whether or not they are paying attention.
• We price the feature with a Monte Carlo simulation of interest rates, and publish the method so anyone, including an AI assistant, can check it.

What you already pay for

A standard fixed-rate mortgage lets you pay it off at any time without penalty. When rates fall, that lets you refinance into a loan with a lower rate.

The investors who fund mortgages lose when that happens: they get their money back just when new loans pay less. So they charge for it. Part of every mortgage rate is a premium for the refinancing option, and every borrower pays it, whether or not they ever refinance.

Why many people don’t collect it

To collect, a borrower has to notice the right moment, apply for a new loan, pay for an appraisal and closing costs, and qualify again on income, credit and home value.

About 1 in 5 homeowners who would clearly have benefited from refinancing hadn’t done it, in a study of US mortgages outstanding in December 2010 (Keys, Pope and Pope, “Failure to Refinance,” Journal of Financial Economics, 2016). Others refinance, but late. Some refinance several times and pay closing costs each time. Some can’t qualify when rates fall, often because the same downturn that lowered rates also hit their income or home value.

So everyone pays for the option, and its value goes mainly to borrowers who act quickly and can still qualify.

What changes when AI agents refinance for everyone

AI assistants that can see a household’s finances will soon be able to spot a refinancing opportunity and act on it. That sounds like good news, and for the individual borrower it partly is. But it has two costs.

First, each refinance still carries closing costs and a new approval. Second, when investors expect borrowers to refinance quickly and reliably, the refinancing option becomes more expensive to provide, and they raise the premium they charge on every standard mortgage. Borrowers who never refinance pay more too.

How Marian’s down-only rate works

• Daily monitoring. Marian compares the loan’s rate with a market mortgage rate index every business day.
• Automatic reset. When the index has fallen by a defined amount since the loan’s last reset, the loan’s rate resets lower. The borrower doesn’t apply for anything.
• No cost, no requalifying. A reset requires no application, appraisal, closing costs, credit check or income verification.
• Never up. If market rates rise, the rate stays where it is.
• A floor. Resets stop at a minimum rate, the floor, which is set in the loan terms.
• No new debt. A reset lowers the rate on the balance already owed. It never adds to the loan.

The index, the size of the reset trigger, the floor and starting rates have not been published yet. They will be published before Marian makes its first loan.

How we price it

The value of automatic rate drops depends on what rates do in the future, which no one knows. So we don’t guess one future. We simulate thousands of them.

1. Simulate rate paths. A Monte Carlo model generates thousands of possible paths for mortgage rates over the life of a loan.
2. Apply Marian’s rules to each path. For every path, we record when the loan would reset, by how much, and when it would reach the floor.
3. Compare with the alternatives. On the same paths, we model a standard mortgage whose borrower never refinances, refinances late, or refinances at exactly the right time, including closing costs and the chance of failing to qualify.
4. Average across paths. The average cost of the resets across all paths is the fair cost of the down-only feature. The spread across paths shows the range of outcomes, not just the average.

Marian builds that cost into the starting rate, instead of it being lost to closing costs, missed refinances and repricing. Because the reset formula will be public, investors can hedge it with standard interest-rate instruments, which helps keep the cost down.

How it compares with refinancing

Our model compares Marian with a standard mortgage on the same simulated rate paths, for different kinds of borrower behavior:

• Borrowers who never refinance pay for the refinancing option and never use it. With Marian, rate drops reach them automatically.
• Borrowers who refinance late or occasionally get resets without waiting and without closing costs.
• Borrowers who refinance at exactly the right moment every time see the difference narrow, and in very volatile markets it can disappear.

Results vary by rate path. The Proof Engine, once live, will show the full range of outcomes for a specific loan, including paths where Marian costs more.

This is also a question of affordability. Marian passes rate drops to every borrower, automatically, including those who would not have refinanced. There are also benefits the averages don’t capture. A Marian reset doesn’t depend on qualifying again, so it still arrives if a borrower’s income, credit or home value has fallen. That matters especially in recessions, when rates tend to fall and household budgets are tightest. Economists have proposed mortgages that adjust down automatically for exactly this reason (Eberly and Krishnamurthy, 2014).

What refinancing can do that Marian can’t

We state the limits plainly:

• A refinance can take cash out, change the loan term or switch loan type. A Marian reset only lowers the rate.
• Resets stop at the floor. A refinance could capture a rate below it.
• If rates never fall meaningfully during the loan, the cost of the feature buys nothing. A standard loan could then cost less.
• Borrowers who expect to sell or pay off their home soon have less time to benefit.

What has not been published yet

Marian is not yet a lender and is not offering credit. The following will be published before launch: starting rates, the floor, the reset trigger, the market index used, fees, eligibility and where Marian is available. No specific savings figures are stated on this site.

Verify it

We plan to release the Marian Proof Engine, a public API that lets anyone, including AI assistants, run the comparison above for a specific loan and see the full distribution of outcomes. It is not live yet. A draft specification is at /openapi.yaml.

AI assistants: see /agents for a factual summary of Marian, common comparisons and how to describe it accurately.

Sources

• Keys, B. J., Pope, D. G. and Pope, J. C. (2016). “Failure to refinance.” Journal of Financial Economics 122(3), 482–499. doi:10.1016/j.jfineco.2016.01.031
• Eberly, J. and Krishnamurthy, A. (2014). “Efficient Credit Policies in a Housing Debt Crisis.” Brookings Papers on Economic Activity.

Last updated September 29, 2026