You have a refinance quote in hand. The closing costs sit near the bottom of it, and someone has asked you what sounds like a simple question. Do you want to bring that money to closing, or add it to the loan? Plenty of people go each way. The catch is that the payment you were shown probably assumed one of the two, and you may not know which.
The plain answer
Rolling the costs in keeps cash in your pocket today. What you give up is a bigger loan, and with it a higher payment and interest on those costs every month until the loan is paid off. Paying up front takes cash now and keeps the new loan at your current balance.
I do not think one answer fits everyone, and the tool does not pick one for you either. What the Refinance tab can do is show you the size of the trade on your own loan, with your rate and your costs, in two runs that differ by a single checkbox.
What the box actually does
The box changes one thing in the math: the amount of the new loan.
Ticked, the new loan is your Current Loan Balance plus your Closing Costs. On the FHA, FHA Streamline, and VA IRRRL types, the tool also adds that program's upfront fee on top. Unticked, the new loan is your Current Loan Balance and nothing more.
The rest follows from there. New Payment (P&I) is figured from the new loan, your New Rate, and your New Term, so a bigger loan means a bigger payment. LTV after refi is the new loan divided by Home Value, so it climbs when the costs ride along. Current Payment (P&I) uses only your current balance, rate, and Years Remaining. It should read the same on both runs, and if it moved, some other field got changed by accident.
Set up the Refinance tab once
Open the Refinance calculator and type your own numbers. Nothing preloaded on the page is yours.
- Refinance Type: Conventional, FHA, FHA Streamline, or VA IRRRL, whichever your quote is for.
- Home Value: your honest best guess. The LTV after refi line needs it and hides without it.
- Current Loan Balance, Current Rate, and Years Remaining: from your latest statement.
- New Rate and New Term: from your quote. BankPricer gives no rate.
- Closing Costs: the total from your quote. Type it once and leave it alone for both runs.
Then look just under Closing Costs at the box labeled Roll closing costs into new loan. It is already ticked when the page loads. That is worth knowing, because if you typed everything in and read the results without noticing the box, you were looking at the rolled version the whole time.
Run it ticked and write it down
With the box ticked, write down Monthly Savings, the Break-even badge, New Payment (P&I), Lifetime Interest Savings, and LTV after refi. Note Current Payment (P&I) as well, as a check for later.
There is no button to press. The tool updates as you type, and again the moment the box changes.
Untick it, change nothing else
Now click the box so it is empty. Leave every other field alone and read the same lines again.
New Payment (P&I) drops, because the loan is smaller. LTV after refi drops for the same reason. Monthly Savings goes up, since the gap between your current payment and the new one just got wider. Current Payment (P&I) holds still. The Refinance read box under the results may change its wording too, since it is rebuilt from the new figures every time.
Break-even and Lifetime Interest Savings need more care. They can move in ways that feel backwards, so each gets its own section below.
Why break-even gets longer when you roll the costs in
This is the part that catches people. You might expect break-even to disappear on the rolled run. You brought nothing to closing, so what is left to earn back?
The tool does not see it that way, and I think that is the honest view. Break-even is your Closing Costs divided by your Monthly Savings, rounded up to whole months, on both runs. The top of that division is the same figure either way. What changes is the bottom. Ticking the box raises your new payment, which shrinks your monthly savings, and the same costs divided by a smaller savings take longer to cover.
So the ticked run shows a longer break-even even though you wrote no check at closing. The costs did not go away. You are paying them off inside the loan, and the smaller monthly gain is where that shows up.
If the new payment does not come in under your current one, the badge reads never, and Monthly Savings shows a minus sign when the new payment is the higher of the two. A ticked run can land there even when the unticked run looked fine, so watch the badge as you click.
The earlier post on how many months it takes to recover closing costs covers what to do with that clock. Here the only question is how the box moves it.
Reading Lifetime Interest Savings both ways
This line is put together a little differently on each run, and it helps to know how before you compare them.
Both versions start the same way. The tool takes the interest left on your current loan and subtracts the interest on the new loan over its full term. On FHA types it also takes away the MIP you would pay over that term.
Unticked, the tool then subtracts your Closing Costs, because you paid them out of pocket. Ticked, it skips that step. The costs sit inside the new loan instead, so the interest on the new loan comes out higher, and that extra interest is already counted.
Look at what the ticked version leaves out. It counts the interest you pay on the rolled costs, but not the costs themselves. You still repay those dollars as part of your principal, a little each month. They just never show up in a line that only counts interest.
So the unticked figure includes the full costs, paid once at closing. The ticked figure includes the interest on the costs and leaves the costs outside the line. Set the two side by side with that in mind. The ticked figure is not wrong; it answers a slightly narrower question.
Both versions also assume you keep the new loan for its whole term, with no extra payments and no sale. That holds on both runs, so it does not tilt the comparison, but it does mean neither line is a promise.
FHA and the extra rows
On Conventional you will see no MIP rows, ticked or unticked. Monthly Savings there is simply Current Payment (P&I) minus New Payment (P&I).
On FHA and FHA Streamline, two more rows appear: Monthly FHA MIP, and a second New payment row marked all in, which adds the MIP to the P&I. The Monthly Savings headline uses that combined payment, and break-even divides by it. Ticking the box grows the MIP along with the loan, since MIP is figured from the loan amount. The MIP rate itself is picked from your LTV and term, so a ticked run that pushes LTV across a band edge can raise the rate as well as the dollars.
VA IRRRL has an upfront funding fee and no monthly MIP, so those two rows stay hidden there.
One quirk worth knowing. On the FHA and VA types, the tool counts the upfront program fee only when the box is ticked. Unticked, that fee does not appear anywhere in the math. Ask how the fee is handled on your actual quote before you lean on the unticked run for those programs.
What this does not tell you
The tool cannot see your bank account. Whether paying the costs up front leaves you enough cash for everything else in your life is your call, and to me it matters more than any line on the screen.
It does not know how long you will keep the loan. Every lifetime figure on the tab assumes the full term.
Your quote may also move. If the closing costs change before you sign, type the new figure and run both versions again.
And lender credits or points, which trade the costs against the rate, are a separate decision that other posts cover.
A second pair of eyes
I work out of Chicago. If you want another read, bring both runs, the ticked one and the unticked one, with your lines written down for each. We can look at them together and talk through what the gap between them means for your plans.
A calculator result is not a commitment to lend.
Jeff Shin, NMLS 1041652. Barrett Financial Group, L.L.C. Chicago. Company NMLS 181106. Equal Housing Lender. Not a commitment to lend.