Type in the offers from your Loan Estimates: the interest rate and the origination charges (section A, points included). You see each monthly payment, what each offer costs over the years you expect to keep the loan, which is cheaper and by how much, when paying more up front for a lower rate pays for itself, and this week's national average rate.
Over the years you keep it
Lender B costs $6,434 less over 7 yearsLender A $2,270 a month · Lender B $2,184 a month · Lender B's extra $2,800 up front pays for itself in month 26
Quick answer: compare mortgage offers by what each costs over the years you will really keep the loan: the lender’s charges (section A of the Loan Estimate) plus the interest you pay in those years. On a $350,000 30-year loan kept 7 years, 6.375% with $4,300 in charges costs $6,434 less than 6.75% with $1,500; its extra $2,800 pays for itself in month 26. Kept only 2 years, the cheaper-up-front offer wins.
How to use the mortgage offer comparison
- Get a Loan Estimate from each lender for the same loan amount and term. It is a standard three-page form, so the numbers line up.
- Type each offer’s interest rate and its section A total (origination charges, points included), then the years you expect to keep the loan before you sell or refinance.
- Read the answer: the cheaper offer over your years and by how much, each monthly payment, the break-even month for paying more up front, and this week’s national average rate for the same term. Copy link keeps the comparison.
The Consumer Financial Protection Bureau’s Loan Estimate explainer shows where each number sits on the form.
How the offers are compared
- Monthly payment is principal and interest: M = P × r ÷ (1 − (1 + r)−n), with r the monthly rate and n the months of the term. Property tax and insurance come on top.
- Cost over your years = the section A charges + the interest paid in those months. The principal you repay is your own money back, so it is not a cost.
- Break-even is the first month in which the lower-rate offer’s charges plus interest so far are no more than the other’s. The quick rule, extra charges ÷ the difference in payment, gives a later month, because the lower rate also repays more principal each month.
- This week’s average is Freddie Mac’s Primary Mortgage Market Survey (the US average for a 30- or 15-year fixed, published each Thursday), read from FRED. It is a benchmark, not an offer: your own rate depends on your credit, your down payment and the points you pay.
Monthly payment per $100,000 borrowed
| Rate | 30-year | 20-year | 15-year |
|---|---|---|---|
| 5.5% | $568 | $688 | $817 |
| 6% | $600 | $716 | $844 |
| 6.5% | $632 | $746 | $871 |
| 7% | $665 | $775 | $899 |
| 7.5% | $699 | $806 | $927 |
| 8% | $734 | $836 | $956 |
Principal and interest only. For $350,000, multiply by 3.5.
Three worked examples
Two offers on $350,000 over 30 years, kept 7 years. Lender A: 6.75% with $1,500 in charges, $2,270 a month. Lender B: 6.375% with $4,300, $2,184 a month. Over 7 years Lender B costs $6,434 less; its extra $2,800 is paid back in month 26.
The same two offers, kept 2 years. If you expect to move or refinance within 2 years, Lender A costs $168 less: 24 months is not long enough for the lower rate to repay its extra charges.
A 15-year loan of $250,000, kept to the end. 6.1% with $900 is $2,123 a month; 5.875% with $3,400 is $2,093. Kept all 15 years, the lower rate costs $2,968 less and breaks even in month 57.
Common mistakes when comparing mortgage offers
- Comparing rates alone. A lower rate is often bought with points in section A. Put both numbers in and compare the cost over your years.
- Paying points on a loan you will not keep. Points pay back only after the break-even month. If you may sell or refinance before it, the offer with lower charges is cheaper.
- Comparing Loan Estimates for different loans. Ask every lender for the same amount, term and loan type, on the same day if you can: rates move daily.
- Reading the APR as the answer. APR spreads the charges over the whole term. If you keep the loan fewer years, the cost over your own years is the fairer comparison.
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Mortgage offer questions
How do you compare mortgage offers?
Get a Loan Estimate from each lender for the same amount and term, then compare what each costs over the years you expect to keep the loan: the section A charges plus the interest you pay in those years. The calculator above does it for up to three offers.
Is it worth buying points on a mortgage?
Only if you keep the loan past the break-even month. On a $350,000 30-year loan, one point ($3,500) that lowers the rate by 0.25% pays for itself in about month 48, whatever the rate. Sell or refinance before then and the points cost you money.
How do you calculate the break-even on mortgage points?
Find the first month in which the lower-rate loan’s charges plus the interest paid so far are no more than the other loan’s. A quicker estimate divides the extra charges by the difference in monthly payment; it comes out later (month 60 or so for one point that buys 0.25%) because it leaves out the extra principal the lower rate repays.
What is this week’s average mortgage rate?
The calculator shows Freddie Mac’s latest weekly average for a 30-year and a 15-year fixed loan, with its date. Freddie Mac publishes it every Thursday from its Primary Mortgage Market Survey.
Should I compare the APR or the interest rate?
Both, and then the cost over your years. APR spreads the charges over the full term, so it favours paying points; if you expect to keep the loan fewer years, compare what each offer costs over those years instead.
What is section A on a Loan Estimate?
Origination charges: what the lender charges to make the loan, including any points. It is the lender’s own part of the closing costs, which is why it is the number to compare; the other sections list third-party services, taxes and insurance, some of which you can shop for yourself.