Compare two loan offers
The APR assumes you keep the loan for thirty years. Almost nobody does. Enter two offers and the years you expect to keep the loan, and see which one is genuinely cheaper over that period.
Over 7 years, Offer B costs $967 less.
Offer A pulls ahead in month 96 (8 years). Leave before then and Offer B was the cheaper loan.
| Offer A | Offer B | |
|---|---|---|
| Disclosed APR | 6.624% | 6.679% |
| Monthly payment | $2,502.02 | $2,567.86 |
| Paid at closing | $9,200.00 | $1,200.00 |
| Cost over 7 years | $180,428 | $179,462 |
Cost over the horizon = everything paid at closing, plus every payment made, plus the balance still owed, minus the amount borrowed.
Why the APR is the wrong number here
The APR answers one question well: what does this loan cost per year if I keep it for its entire term? For a thirty-year mortgage that means thirty years.
Real borrowers do not behave that way. They sell, they relocate, they refinance when rates fall. Most mortgages are gone long before term — and every year you shave off the holding period makes the money you paid at closing more expensive in annualized terms, not less.
That is the flaw this page exists to correct. Because the APR spreads up-front costs across the full term, it systematically flatters the offer that takes more of your money at closing. The loan with the lowest disclosed APR is frequently the wrong choice for someone who will move in five years.
What is being compared
For each offer we compute what you are actually out of pocket by the end of your horizon:
everything paid at closing, plus every payment made, plus the balance still owed, minus the amount you borrowed
That last part matters and is where simpler comparisons go wrong. Two loans with different rates pay down principal at different speeds, so comparing payments alone credits the slower-amortizing loan for money it never repaid. Adding the remaining balance back in puts both offers on the same footing: this is the true cost of having borrowed, whenever you walk away.
Reading the break-even month
The break-even month is where the two lines cross — the point from which the offer with higher up-front costs has finally recovered them through its lower rate.
Its meaning is blunt: if you expect to be gone before that month, the other offer is cheaper. Not marginally, not in theory — you will have paid more money. And if you are genuinely unsure how long you will stay, that uncertainty argues for the offer with less cash at closing, because it is the one that does not require a long holding period to pay off.
Typical break-even points for a point of discount run somewhere between four and seven years, which is uncomfortably close to how long many people actually keep a mortgage.
What this does not account for
The opportunity cost of the cash. Money handed over at closing could have been invested, or kept as reserves. Including that would push break-even further out and make points look worse still.
Tax treatment. Mortgage interest and points may be deductible depending on your circumstances, which shifts the arithmetic. This is a pre-tax comparison.
Rate volatility. If rates fall enough that you refinance, the offer with heavy up-front costs loses the most, because those costs were an investment in a loan you no longer hold.
Third-party closing costs. Appraisal, title and settlement are real money but are usually similar across lenders, so leaving them out rarely changes which offer wins. Add them to the fee boxes if they differ materially.
How to use this properly
Get Loan Estimates from both lenders on the same day — rates move daily and a comparison across two weeks compares the market, not the lenders. Enter section A and section B charges as the fees. Then set the horizon honestly: not how long the loan runs, but how long you expect to be in the house.
If the answer changes depending on which horizon you enter, you have learned the most useful thing this tool can tell you — that the decision hinges on how long you stay, and not on which lender quoted the better rate.