Loan Comparison Calculator
Compare two mortgage offers side by side: monthly payments, total interest paid, and total cost over the life of each loan.
Results
Visualization
How It Works
Comparing mortgage offers requires looking beyond the interest rate. A lower rate with higher closing costs may cost more overall than a slightly higher rate with lower fees. This calculator compares two loan offers on monthly payment, total interest paid, and total cost including closing costs to help you choose the better deal.
The Formula
Total Interest = (Monthly Payment x Number of Payments) - Principal
Total Cost = Total Payments + Closing Costs
Variables
- P — Loan principal (amount borrowed)
- r — Monthly interest rate (annual rate / 12 / 100)
- n — Total number of monthly payments (term in years x 12)
- Closing Costs — Upfront fees paid at loan closing, which vary between lenders and affect total cost
Worked Example
Comparing a $300,000 loan: Loan A at 6.5% for 30 years with $6,000 closing costs has a $1,896/month payment and $388,587 total interest ($694,587 total cost). Loan B at 5.75% for 15 years with $8,000 closing costs has a $2,491/month payment but only $148,425 total interest ($456,425 total cost). Loan B saves $238,162 overall despite the higher monthly payment.
Practical Tips
- Compare the total cost of each loan, not just the monthly payment. A lower payment over a longer term often costs far more in total interest.
- Include closing costs and points in the comparison since a lower rate with 2 discount points may not save money unless you keep the loan long enough.
- Calculate the break-even point for paying points: divide the point cost by the monthly payment savings to see how many months until you recoup the upfront cost.
- Consider how long you plan to stay in the home. A 15-year loan saves the most interest but only if you stay long enough to benefit.
- Ask each lender for a Loan Estimate form (standardized by CFPB) to make apples-to-apples comparisons of rates, fees, and terms.
Frequently Asked Questions
Is a 15-year mortgage always better than a 30-year?
A 15-year mortgage saves dramatically on total interest but requires a much higher monthly payment. If the higher payment strains your budget or prevents you from saving for retirement, a 30-year with extra payments toward principal can provide flexibility while still reducing interest. The best choice depends on your cash flow and financial goals.
Should I pay points to buy down the rate?
Each discount point costs 1% of the loan amount and typically reduces the rate by 0.25%. Calculate the break-even period: if a point costs $3,000 and saves $60/month, you need 50 months (4.2 years) to break even. Pay points only if you plan to keep the loan longer than the break-even period.
How do I compare an adjustable rate to a fixed rate?
ARMs offer lower initial rates but can adjust upward after the fixed period. Compare the ARM initial payment to the fixed rate payment, then model worst-case scenarios using the ARM caps. If the ARM rate could adjust to its lifetime cap and that payment is still affordable, the ARM may be worth the risk for the initial savings.
What about refinancing later to a better rate?
Refinancing involves new closing costs (typically $3,000-$8,000), so you need to save enough through a lower rate to recoup those costs. As a rule of thumb, refinancing makes sense if you can lower your rate by at least 0.5-0.75% and plan to stay in the home for 3+ more years.
Does the APR tell me which loan is cheaper?
APR (Annual Percentage Rate) includes the interest rate plus most fees spread over the loan term, making it useful for comparing loans with different fee structures. However, APR assumes you keep the loan for the full term. If you plan to sell or refinance early, focus on total cost over your expected holding period instead.
Sources
- CFPB: How to Compare Mortgage Offers
- Freddie Mac: Mortgage Rates and Points
- Federal Reserve: Consumer Handbook on Adjustable-Rate Mortgages