Understanding your comparison results
The verdict reflects the full-term lifetime cost, but the break-even month matters just as much for borrowers who may not keep the loan to maturity. The table summarizes how to read the two figures together.
| Situation | How to read the result |
|---|---|
| You expect to keep the loan well past the break-even month | The lifetime verdict applies — the lower-rate, higher-fee option's savings compound for the rest of the term |
| You may sell or refinance before the break-even month | The extra upfront fee is never fully recovered, so the lower-fee option can be cheaper in practice despite the lifetime verdict |
| Break-even shows 0 months | The comparison does not involve trading higher fees for a lower payment (one option wins on both), so no break-even applies |
- The "Lower lifetime cost" verdict is displayed as "optionA" or "optionB", referring to the first and second offers you entered.
- The comparison assumes both loans run to full term with no prepayments, refinancing, or rate changes; adjustable-rate offers cannot be compared this way beyond their fixed period.
- Lifetime cost here covers interest and the entered fees only — it excludes property taxes, insurance, PMI, and escrow items, which are usually similar across offers on the same home.
- Comparing loans of different terms (for example 30 vs 15 years) mixes payment affordability with total cost; the shorter term almost always wins on lifetime cost but requires a much higher payment.
What is a mortgage comparison?
A mortgage comparison evaluates two loan offers on the same principal by looking past the headline interest rate to the full cost of each loan: the monthly payment, the total interest paid over the term, and the upfront fees (points, origination charges, and other closing costs) required to obtain each rate. The Consumer Financial Protection Bureau encourages borrowers to obtain Loan Estimates from multiple lenders precisely because offers with different rate-and-fee combinations cannot be ranked by rate alone.
A common trade-off is paying discount points — an upfront fee, typically 1% of the loan amount per point — in exchange for a lower rate. Whether that trade pays off depends on how long the borrower keeps the loan: the lower payment recovers the extra fee only gradually, and the month in which cumulative payment savings equal the extra fee is the break-even point. Selling or refinancing before break-even means the fee was never recovered.
This calculator reports the lifetime verdict — which option costs less if the loan runs to full term — alongside the break-even month. The two can point in different directions for borrowers who expect to move or refinance early, which is why both figures are shown.
How to use this mortgage comparison calculator
- Enter the loan amount common to both offers.
- Enter Option A's annual interest rate, term in years, and total upfront fees (from the Loan Estimate's closing-cost figures).
- Enter the same three values for Option B.
- Read each monthly payment, the verdict on which option has the lower lifetime cost, the size of the lifetime difference, and — when one option trades higher fees for a lower payment — the break-even month.
- Worked example: on a $300,000 loan over 30 years, Option A at 6.5% with $3,000 fees costs $1,896.20 per month, while Option B at 6.1% with $6,000 fees costs $1,817.98. Option B saves roughly $25,159 over the full term, and its extra $3,000 in fees is recovered in about month 38.
The formulas behind mortgage comparison
Each option's payment uses the standard fixed-rate amortization formula. Lifetime cost is total payments minus the principal (i.e., total interest) plus the upfront fees; the option with the smaller lifetime cost is reported as cheaper. The result labeled "optionA" means Option A is cheaper over the full term, and "optionB" means Option B is.
The fee break-even divides the fee difference by the monthly payment difference: how many months of lower payments it takes to recover the extra upfront cost. It is reported when the higher-fee option has the lower payment; when the comparison does not involve that trade-off, the break-even shows 0 months.
Common mistakes
- Ranking offers by interest rate alone and ignoring the fees charged to obtain each rate — the CFPB's Loan Estimate exists precisely so both can be compared together.
- Paying points for a lower rate without checking the break-even month against how long you realistically expect to keep the loan.
- Comparing a 30-year offer against a 15-year offer on lifetime cost alone — the shorter term wins on total interest almost by construction, but the payment difference is the real decision.
- Entering only discount points as fees and omitting origination charges and other lender fees that also differ between offers.
- Treating the lifetime difference as guaranteed savings when a future refinance or early sale would cut the comparison short.
الأسئلة الشائعة
How do I compare two mortgage offers with different rates and fees?
Compute each offer's monthly payment, then add total interest over the term to the upfront fees to get a lifetime cost for each. The lower lifetime cost wins if the loan runs to maturity. Also compute the break-even month — the extra fee divided by the monthly payment saving — because selling or refinancing before break-even means the higher fee was never recovered.
What are discount points on a mortgage?
Discount points are an upfront fee paid at closing to reduce the interest rate, typically priced at 1% of the loan amount per point. The Consumer Financial Protection Bureau explains that points are essentially prepaid interest: they lower every future payment slightly in exchange for more cash at closing, which pays off only if the loan is kept long enough to pass the break-even point.
What does the break-even month mean?
The break-even month is when the accumulated savings from a lower monthly payment equal the extra upfront fees paid to get that lower rate. In the worked example, Option B costs $3,000 more in fees but saves $78.22 per month, so the fee is recovered in about month 38. Keeping the loan beyond that month makes the higher-fee option cheaper overall; exiting earlier makes it more expensive.
Why does the verdict show "optionA" or "optionB"?
The verdict identifies which of the two offers you entered has the lower lifetime cost — total interest over the full term plus upfront fees. "optionA" refers to the first set of rate, term, and fee inputs; "optionB" to the second. It is a full-term comparison, so it should be read together with the break-even month if you might not keep the loan to maturity.
Should I use APR instead of this comparison?
APR is a standardized disclosure that folds certain fees into a single annualized rate and is useful for a first screen, but it assumes the loan runs to full term and treats fees in a specific regulatory way. A side-by-side lifetime cost and break-even comparison shows the actual dollar mechanics, including what happens if you exit the loan early — something a single APR figure cannot convey.
Does this calculator include taxes and insurance?
No. It compares principal, interest, and the upfront fees you enter. Property taxes, homeowner's insurance, mortgage insurance, and HOA dues add to the real monthly housing cost but are generally the same regardless of which lender's offer you accept, so they rarely change which offer is cheaper.
المراجع
- Consumer Financial Protection Bureau (CFPB). Explore interest rates and Loan Estimate explainer. consumerfinance.gov.
- Consumer Financial Protection Bureau (CFPB). What are discount points and lender credits and how do they work? consumerfinance.gov.
- Federal Reserve Board. A consumer's guide to mortgage settlement costs. federalreserve.gov.
- Freddie Mac. Understanding loan options and comparing mortgage offers. freddiemac.com.
- Brueggeman WB, Fisher JD. Real Estate Finance and Investments. 15th ed. McGraw-Hill Education, 2019.