Compare refinance Loan Estimates without confusing lower payments with lower borrowing costs

1. Make sure the two offers are actually comparable

Ask lenders to quote the same approximate remaining principal, repayment term, fixed or adjustable product and intended closing date. A 30-year refinance can look much cheaper each month than a 15-year refinance because it spreads principal repayment over twice as many months. That does not make it cheaper over time. Check page 1 of each Loan Estimate for loan amount, interest rate, rate-lock status, principal-and-interest payment, mortgage insurance and total estimated monthly payment.

For an adjustable-rate mortgage, ask how the rate may reset and what the payment could become under the contract. A comparison assuming today's rate stays unchanged is not a worst-case forecast. The standardized Loan Estimate covers many consumer mortgages, but do not expect the same form for a HELOC or reverse mortgage. The CFPB's form explainer identifies each line.

2. Compare fees lenders control—not just total cash needed

On page 2, focus first on Section A, Origination Charges, Section B, Services You Cannot Shop For, and the lender credits in Section J. Different lenders can set different charges and credits. Meanwhile estimated property taxes, homeowners insurance, prepaid interest and escrow deposits may vary because of timing or assumptions rather than lender competitiveness. Do not treat an apparently low escrow estimate as a guaranteed saving.

Offer B is $2,500 lower on these selected upfront lines, but it may carry a higher rate or different loan term. A lender credit can reduce today's bill in exchange for a higher interest rate. Compare both written rates and the cost over your intended holding period. The CFPB's loan-offer comparison highlights lender-controlled charges.

3. Calculate the five-year borrowing cost from page 3

On page 3 of the Loan Estimate, the Comparisons area has an In 5 years line. The first number is the estimated total paid in five years, including principal. The second is the principal repaid in that time. Subtract the second number from the first to estimate the five-year cost of interest and fees. It is not the amount you must bring to closing, and it is not the outstanding loan balance.

Compare that number across like-for-like offers. The standardized five-year comparison can be helpful even if you eventually keep the mortgage longer, but it does not replace your own expected holding period. A homeowner expecting to sell in 24 months should not assume a 60-month result tells the whole story. Adjustable-rate examples may assume the current rate stays unchanged even though the rate could increase.

4. Check the remaining principal at the same future date

Simple payment break-even divides incremental cash closing costs by monthly payment savings. For example, $4,800 paid upfront divided by $100 in monthly savings is 48 months. But a new 30-year mortgage may reduce the payment mainly by slowing principal repayment. At month 48, the new mortgage could have a higher outstanding balance even though you paid less each month.

For a more useful comparison, choose the same future month for both loans. Add payments made over that period, incremental upfront fees and remaining principal, then compare the totals. Account for any fees financed into the new balance. Do not enter a cost as both financed principal and cash paid: that would double count it. Taxes, investment opportunity costs, rate changes and mortgage insurance can also alter the result.

Compare refinance payments and remaining balances → The linked calculator models a fixed-rate payment-only payback and a common future horizon. For a rate quote with discount points, use the US discount-points calculator alongside the lender's written offer.

5. Distinguish Cash to Close, closing costs and a rate lock

Estimated Cash to Close is what you may need to provide at settlement after relevant adjustments. It is not identical to Total Loan Costs: cash to close may reflect prepaids, initial escrow funding, deposits and credits. If fees are rolled into a refinance, less cash may be due today while the financed principal and interest rise. Ask for both the cash requirement and the new loan amount in writing.

Also check whether the quoted interest rate is locked, the expiration date and any extension cost if closing is delayed. A lower unlocked quote is not necessarily available on the date you sign. When comparing estimates issued on different dates, ask lenders to refresh them under similar market conditions.

6. Reconcile the final Closing Disclosure before signing

For most mortgages covered by these rules, the lender must provide the Closing Disclosure at least three business days before closing. Compare its final loan amount, interest rate, monthly payment, closing costs and Cash to Close against your latest Loan Estimate. Significant differences deserve an explanation before you sign. The CFPB Closing Disclosure guide explains the final form.

Questions homeowners commonly ask

Is a “no-closing-cost” refinance free?

Not necessarily. Lender credits may offset upfront charges in exchange for a higher rate, or some fees may be financed. Compare the long-run costs rather than the marketing label.

Is the lowest APR always the best choice?

APR is one cost measure, but your expected holding period, loan term, rate structure and upfront charges matter. Compare written offers for the same product and check the five-year disclosure.

What if I plan to move in two years?

Use a two-year holding-period scenario as well as the standardized five-year disclosure. A large upfront fee may not be recovered before you sell or refinance again.

Does this replace professional mortgage advice?

No. All figures here are hypothetical. Your lender's actual disclosures, contract, state requirements and personal financial situation control the decision.