Break-even on a higher mortgage fee

Break-even is the first month the lower rate’s fees plus interest are no longer higher than the other offer.

Which offer is tested

The test runs only when one offer has a lower note rate than the other. That lower-rate offer is the one that might be “buying” the rate with fees. If the rates are equal, there is no lower-rate side to wait for.

If that offer’s fees are already the same or lower, break-even is immediate. You do not wait to be ahead.

The month-by-month check

For each month, the tool adds that offer’s fee to the interest paid so far, and does the same for the other offer. The first month the lower-rate side is less than or equal is the break-even month.

Interest so far comes from each offer’s own schedule. A lower rate has a lower payment and less interest each month, which is how it catches a higher fee.

No month means it does not catch up

If the loan ends and the lower rate is still behind, break-even is empty. On these inputs the extra fee is never earned back.

Break-even is not the same as the hold. You might plan to hold for five years while break-even is year nine. Then the lower rate is still the more expensive choice for the time you will actually keep it.

This explains how WiseCalculator treats the numbers you type. It is not a lender’s offer and it is not advice for your loan.