Why the lower rate is not always the cheaper loan
Lenders compete on two numbers that pull in opposite directions: the interest rate and the cash you hand over at closing. Discount points are the clearest example. One point costs 1% of the loan amount and usually buys the rate down by roughly 0.25%. Whether that trade is worth it depends entirely on how long you keep the loan, so the only fair comparison is a side-by-side view of monthly payment, total interest and upfront cost.
This calculator amortizes each offer with the standard fixed-payment formula, M = P x r x (1 + r)^n / [(1 + r)^n - 1], where P is the amount borrowed, r is the annual rate divided by 12 and n is the number of monthly payments. It then adds the fees you typed in to the sum of all payments to get a true total cost for each offer.
A worked example
Offer A: $300,000 for 30 years at 6.5% with $3,000 in lender fees. The payment is $1,896.20 a month, total payments come to $682,633 and total interest is $382,633. With fees, the loan costs $685,633.
Offer B: the same $300,000 and term at 6.125%, but the lender charges $8,000 because you bought two points. The payment drops to $1,822.83, total interest falls to about $356,219, and total cost including fees is roughly $664,219. Offer B saves about $21,400 over the full term.
The catch is timing. You save $73.37 a month but pay $5,000 more up front, so the break-even is $5,000 / $73.37 = about 68 months, or five and a half years. Sell or refinance before then and Offer A was the better deal. That is why the tool prints the break-even alongside the totals.
Reading the first-year breakdown
The second table shows where year one actually goes. On Offer A you pay $22,754 in that first year, but only about $3,353 reduces the balance; the other $19,401 is interest. That is normal for an amortizing loan and it explains why paying a point to cut the rate has such a large effect early on, and why a few extra principal payments in the first years matter more than the same dollars later.
Two cautions. First, compare like with like: use the same loan amount and term in both columns, or the totals are not meaningful. Second, some closing costs - appraisal, title, recording, prepaid property taxes - are the same no matter which lender you pick, so either enter them in both columns or leave them out of both. Only lender-specific charges change the answer.