Rate changes the payment; price changes the economics
A rate is one input. Points, lender fees, credits, APR, monthly principal and interest, and time determine the actual tradeoff.
Calculate the break-even
Divide the additional upfront lender cost by the monthly payment savings. The result is the approximate number of months required for the lower-rate offer to recover its added cost.
Compare cost inside the consumer’s timeline
If break-even falls after the expected sale or refinance, the lower-rate offer may never return its added cost. If it falls well before that date, it may be the stronger fit.
What could change the answer?
- The exact lender-controlled cost and monthly principal-and-interest difference.
- How long the mortgage is kept.
- Whether the consumer refinances, sells, or makes extra principal payments.
- Final points, credits, fees, program, and locked rate.