Mortgage Comparison Calculator
Compare up to 4 mortgage offers side by side on total cost, monthly payment, and APR. Find the best deal for your home loan.
Mortgage Comparison Calculator
Calculator
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Formula: M = P[r(1+r)^n] / [(1+r)^n - 1]
Worked example — Offer B saves $26,516 over the life of the loan, with a breakeven at 3.3 years
Formula
M = P[r(1+r)^n] / [(1+r)^n - 1]
Monthly payment M is calculated from principal P, monthly rate r = annual rate / 12, and total payments n = years x 12. Total cost includes all monthly payments plus upfront costs (points + closing costs).
Worked Examples
Example 1: 30-Year Fixed: Low Rate with Points vs Higher Rate No Points
Problem:Compare two 30-year offers on a $350,000 loan. Offer A: 6.5% rate, 0 points, $5,000 closing. Offer B: 6.0% rate, 1 point ($3,500), $6,000 closing.
Solution:Offer A: Monthly = $2,212, Total interest = $446,248, Upfront = $5,000, Total cost = $801,248 Offer B: Monthly = $2,098, Total interest = $415,232, Upfront = $9,500, Total cost = $774,732 Monthly savings with B = $114/mo Upfront cost difference = $4,500 Breakeven = $4,500 / $114 = 39.5 months (3.3 years) Lifetime savings with B = $26,516
Result:Offer B saves $26,516 over the life of the loan, with a breakeven at 3.3 years
Example 2: 15-Year vs 30-Year Comparison
Problem:Compare a 30-year at 6.5% vs a 15-year at 5.75% on a $350,000 loan, both with $5,000 closing costs.
Solution:30-Year: Monthly = $2,212, Total paid = $796,248 + $5,000 = $801,248 15-Year: Monthly = $2,908, Total paid = $523,440 + $5,000 = $528,440 Monthly difference = $696 more for 15-year Total savings with 15-year = $272,808 5-year equity: 30-yr = ~$24,500, 15-yr = ~$115,500
Result:15-year saves $272,808 total but costs $696 more per month
Frequently Asked Questions
How do I compare different mortgage offers effectively?
Comparing mortgage offers requires looking beyond just the interest rate to understand the true cost of each loan. The key metrics to compare are the monthly payment amount, the total interest paid over the full loan term, upfront costs including discount points and closing costs, and the effective annual percentage rate (APR) which combines the interest rate with fees. A lower rate with high points might cost more overall than a slightly higher rate with no points, especially if you plan to sell or refinance within a few years. The breakeven point, which is the number of months it takes for the lower payment to offset the higher upfront cost, is critical for deciding between offers. If you plan to stay in the home longer than the breakeven period, paying points can save significant money over the life of the loan.
What are mortgage points and when should I buy them?
Mortgage discount points are upfront fees paid to the lender at closing to reduce your interest rate. One point equals 1% of the loan amount and typically reduces the rate by 0.25%. For a $350,000 loan, one point costs $3,500 and might lower your rate from 6.5% to 6.25%, saving roughly $60 per month. The breakeven point is $3,500 divided by $60, which equals about 58 months or nearly 5 years. If you plan to stay in the home longer than 5 years, buying the point saves money. If you might move or refinance sooner, skip the points. Some lenders offer fractional points like half a point for a smaller rate reduction. In a high-rate environment, points become more attractive because the absolute dollar savings from each rate reduction are larger on bigger loan amounts.
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage typically offers a lower interest rate (usually 0.5% to 0.75% lower than a 30-year) and dramatically reduces total interest paid, but requires significantly higher monthly payments. For a $350,000 loan at 6.5% over 30 years, the monthly payment is about $2,212 with total interest of $446,248. The same loan at 5.75% over 15 years has a monthly payment of $2,908 but total interest of only $173,440, saving $272,808 in interest. The 15-year payment is $696 more per month. Choose the 15-year if you can comfortably afford the higher payment without sacrificing emergency savings or retirement contributions. Choose the 30-year if cash flow flexibility is important, and consider making extra payments when affordable. Some borrowers take the 30-year for safety but make payments as if they had a 15-year mortgage.
What closing costs should I expect with a mortgage?
Typical closing costs range from 2% to 5% of the loan amount and include several categories of fees. Lender fees include the origination fee (0.5% to 1% of loan), application fee ($300 to $500), underwriting fee ($400 to $900), and credit report fee ($25 to $50). Third-party fees include the appraisal ($300 to $600), title search and insurance ($1,000 to $3,000), survey ($300 to $500), and attorney fees ($500 to $2,000). Government fees include recording fees ($25 to $250) and transfer taxes which vary by state. Prepaid items include homeowner insurance premium, property taxes for the initial escrow, and prepaid daily interest charges from closing to month end. Some closing costs are negotiable, and you can ask the seller to cover a portion as part of your purchase agreement. Always request a Loan Estimate from each lender to compare closing costs line by line.
How does refinancing factor into mortgage comparison decisions?
When comparing mortgage offers, consider the likelihood that you might refinance in the future, as this affects which offer truly saves you the most money. If interest rates are historically high, choosing a no-points adjustable or higher-rate fixed mortgage might be smarter because you plan to refinance when rates drop. The average homeowner refinances every 4 to 7 years, so paying large upfront costs for a minimal rate reduction often does not break even. Calculate the breakeven period for each option: divide the total upfront cost difference by the monthly payment savings. If your breakeven period exceeds 5 years, the cheaper-upfront option is usually better unless you are certain about staying long term. Also consider that refinancing itself costs $3,000 to $6,000 in closing costs, so factor those future costs into your overall comparison. Some lenders offer no-closing-cost refinancing by rolling costs into a slightly higher rate.
What is the difference between the interest rate and the APR on a Loan Estimate?
The note rate is what actually drives your monthly principal and interest payment. The annual percentage rate restates the loan as a single yearly cost after folding in prepaid finance charges such as origination fees, discount points and mortgage insurance, spread across the full term. APR is therefore useful for ranking two fixed-rate offers of the same term and loan size, but it becomes misleading if you pay the loan off early, because it assumes you hold the mortgage for every scheduled payment. Compare the fee itemization as well as the APR.
How do I compare an adjustable-rate offer against a fixed-rate offer?
An adjustable-rate mortgage carries a fixed introductory period, then resets periodically to an index plus a fixed margin, bounded by initial, periodic and lifetime caps. To compare it fairly, model two scenarios: payments if the rate stays at the introductory level, and payments if it climbs to the lifetime ceiling. The initial adjustment cap limits how far the first reset can move, so the rate can only reach that ceiling over successive adjustments, but pricing the capped payment is the right stress test. If the worst case is affordable and you expect to sell or refinance inside the fixed period, the lower start rate can be worth it. If the capped payment would strain your budget, the fixed offer buys certainty.
How should I compare offers if I expect to sell within five years?
Total interest over the full term stops being the deciding metric when the loan will not run to term. Instead compare the interest paid and the principal repaid during your actual holding period, plus every upfront dollar. A short horizon punishes offers that front-load cost through discount points, because the monthly saving has too few months to recover the fee. Look at the remaining balance after five years too, since that figure, subtracted from your expected sale price and selling costs, is the cash you walk away with.
What is a lender credit and how does it change a comparison?
A lender credit is the mirror image of discount points, sometimes called negative points or a rebate. You accept a higher note rate and the lender pays part of your closing costs at settlement. That lowers the cash needed to close but raises every monthly payment and the lifetime interest. Enter it as a reduction in upfront cost paired with a higher rate, then check how long it takes for the extra interest to exceed the credit. Credits usually favor borrowers who are short on cash or expect to refinance quickly.
Why do early mortgage payments go mostly to interest?
Under the amortization formula the payment is fixed, but each installment first covers the interest accrued on the outstanding balance for that month, and only the remainder reduces principal. Early on the balance is at its largest, so the interest slice dominates and equity builds slowly; as principal falls the interest portion shrinks and the principal portion grows, accelerating toward the end. This is why a lower rate or a shorter term changes the shape of equity build-up so sharply, and why extra principal paid early saves the most interest.
References
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer · Editorial policy
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