Why your refinance quote looks good (but isn’t)
Refinance quotes can look attractive on the surface, but small details change the true cost. The fastest way to compare is to line up net costs, monthly savings, and break-even.
Use the refinance calculator as a neutral referee, check today's rates, and read related guides like break-even explained or refinance or wait.
Reality check: A “better” quote can still be worse if the savings take too long to recover.
Bring this to a quote call: Ask for net costs, the new payment, and break-even months in writing. If they won’t share that, it’s a red flag.
Ask for these three numbers
- Net closing costs: Fees minus lender credits.
- Monthly payment change: Before vs. after.
- Break-even months: Net costs divided by savings.
If a quote won’t share these clearly, it’s hard to compare it fairly.
Trap #1: Rate focus hides points
A low rate often comes with points. Points increase upfront cost, so you need to stay long enough to recover them.
Ask: “How many months until the points pay back?” If it’s years, that “great rate” may not be great for you.
Trap #2: Payment looks lower due to term reset
Resetting to a new 30-year term can make the payment look lower while increasing total interest over time.
If you’re already years into the loan, compare interest over the remaining term, not just the monthly payment.
Trap #3: Lender credits raise the rate
Credits reduce cash due at closing, but they raise the rate. Compare break-even across credit and no-credit options.
Credits can be smart if you plan to move soon. They’re less ideal if you plan to stay long term.
Trap #4: APR limitations
APR is useful but assumes you keep the loan to term. If you plan to move sooner, APR can overstate the benefit of paying points.
Use APR as a filter, then verify with break-even and total cost.
Trap #5: Prepaid items vs. true closing costs
Prepaid taxes and insurance aren’t true refinance costs because you would pay them anyway. Focus on lender fees, points, and credits.
How to compare quotes in 10 minutes
- List net costs: Fees minus lender credits.
- Compare payment change: Before vs. after.
- Calculate break-even: Costs divided by savings.
- Check term impact: Does the clock reset?
- Decide by goals: Payment relief vs. total cost.
For a deeper look at break-even, see refinance break-even explained or the 0.5% guide in is refinancing worth it for a half-point drop.
Common mistake: Comparing quotes by rate alone without checking points, credits, and term reset.
Frequently asked questions
Are lender credits bad?
Not necessarily. They lower upfront costs but usually raise the rate. They can make sense if you plan to move before break-even.
Is APR the best comparison tool?
APR helps compare offers but assumes you keep the loan to term. Use it alongside break-even and total cost.
How do I compare two refinance offers?
Compare net costs, monthly savings, and break-even for each quote. Then check total interest if you expect to keep the loan long term.
What fees should I ignore?
Prepaid items aren’t true refinance costs. Focus on lender fees, points, and credits.
Should I choose lower payment or lower total cost?
Choose based on your goals. Lower payment helps cash flow, while lower total cost is usually better if you’ll keep the loan longer.
Use the calculator as a neutral referee
The calculator helps you compare quotes side-by-side without relying on sales framing.