The trap, with real numbers
Two genuine-looking offers on a $320,000 loan. One advertises the lower rate. It is the more expensive loan for most buyers.
| Rate | Monthly P&I | Lender charges | 5-year cost of borrowing |
|---|
| Lender A | 6.125% | $1,944 | $2,400 | $97,291 |
| Lender B | 5.99% | $1,917 | $7,900 | $100,627 |
Lender B has the lower rate and the lower payment, and is $3,336 more expensive over five years. Its extra $5,500 up front does not pay for itself until year 12.9 — so it is the right answer only if you are confident you will still hold this exact loan then. Most people are not: the median mortgage is refinanced or paid off well before that. Nothing on either Loan Estimate tells you this. That crossover is the entire product.
Why we ignore most of the closing costs
A Loan Estimate runs to three pages and most of it is noise for shopping purposes. Title insurance, escrow, recording fees, transfer tax and prepaid property tax are set by your property, your county and the calendar — they are nearly identical whichever lender you choose, so comparing them buries the difference you are actually trying to see. What varies between lenders is the money in section A: origination charges, underwriting, and discount points, offset by any lender credits. That is what this tool compares, and it is what you should push on when you negotiate.
What this is, and what it isn't
This is arithmetic on numbers you supply. It is not a rate quote, not a pre-approval, and not advice about which lender to use — we do not originate loans and we are not paid by any lender, so the ranking has nothing behind it except total borrower cost. Nothing you type is transmitted or stored; the page works with your network disconnected. Two limits worth knowing: the comparison assumes both loans are fixed-rate for the full term you selected, so an ARM's teaser period is not modelled, and it counts principal repayment as recovered value rather than cost, which is why "total cost of borrowing" is lower than the sum of your payments.
Is a lower interest rate always the better mortgage?
No, and this is the single most common way borrowers lose money. A lower rate is usually bought with points and higher origination charges, which you pay on day one and only recover slowly. In the worked example on this page, 5.99% with $7,900 in lender charges loses to 6.125% with $2,400 for the first 12.9 years — because it takes that long for the smaller payment to repay the bigger upfront cost. Whether the lower rate wins depends entirely on how long you keep the loan, which is why this tool asks.
Should I pay points on a mortgage?
Only if you will keep the loan past the break-even, and only if the money has no better use. Points are a prepayment of interest: you hand over cash now for a smaller payment later. The break-even is the month where the cumulative saving finally exceeds what you paid, and this page computes it exactly for your numbers. If there is a realistic chance you sell or refinance before then — and most loans do not run their full term — points cost you money.
What is the difference between the interest rate and the APR?
The note rate sets your monthly payment. The APR folds the lender's charges into a single rate so two offers can be compared, and it is always the higher of the two when there are fees. APR is a better comparison than the rate alone, but it still assumes you hold the loan for the entire term, so it systematically flatters offers with big upfront costs. For a loan you expect to hold five or seven years, the total cost of borrowing over that period — which this page ranks by — is the more honest number.
Which costs should I actually compare between lenders?
The lender's own charges: origination, underwriting, discount points, and any lender credits, which appear in section A of a Loan Estimate. Title, escrow, recording fees, transfer taxes and prepaid property taxes are real money, but they are set by the property and the county rather than the lender, so they are nearly identical across quotes and comparing them just adds noise. This tool asks only for the lender charges for that reason.
How many mortgage quotes should I get?
At least three, and gathered inside a short window. Multiple mortgage credit pulls within a 45-day period count as a single inquiry for scoring purposes, so shopping does not damage your credit the way people fear. The spread between lenders on the same day is routinely larger than the change in the national average over an entire month — which is why shopping is worth far more than trying to time the market.
Can I negotiate a mortgage rate?
Yes. A Loan Estimate is a written offer, and lenders routinely improve one when shown a better competing offer in writing. The effective move is to send your best current Loan Estimate to the others and ask them to beat it on both APR and total lender charges — this page generates that message for you. Ask for a revised Loan Estimate rather than a verbal promise, because only the written document is comparable.
Is this tool free, and do you get paid by lenders?
It is free and no lender pays us anything. Nothing you enter is transmitted — the arithmetic runs entirely in your browser, which you can verify by disconnecting from the internet and watching it keep working. Ranking is by total borrower cost and nothing else; there is no sponsored placement here, and we do not quote rates or originate loans.