Mortgage Comparison Calculator
Compare up to 4 mortgage offers side by side on total cost, monthly payment, and APR. Enter values for instant results with step-by-step formulas.
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer
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 credit score do I need for the best mortgage rates?
A FICO score of 760 or higher typically qualifies you for the lowest advertised mortgage rates. Dropping from 760 to 700 can cost you 0.25-0.50% more in interest — on a $400,000 30-year loan, that difference costs roughly $60-$120 more per month and over $25,000 in extra interest. Scores between 620-699 still qualify for conventional loans but at noticeably higher rates. Scores below 580 generally require FHA loans, which accept down payments as low as 3.5% but mandate mortgage insurance for the life of the loan. Before applying, pay down revolving balances to below 30% of credit limits — this alone can boost your score 20-40 points.
What is the difference between fixed-rate and adjustable-rate mortgages?
A fixed-rate mortgage locks your interest rate for the entire loan term — 15, 20, or 30 years — so your principal and interest payment never changes. This predictability is valuable in rising-rate environments. An adjustable-rate mortgage (ARM) begins with a lower fixed rate for an introductory period (commonly 5, 7, or 10 years), then resets annually based on an index like SOFR plus a margin. A 5/1 ARM might start at 5.5% versus a 30-year fixed at 6.5%, saving roughly $220/month on a $400,000 loan. ARMs are advantageous if you plan to sell or refinance before the first adjustment, but carry payment uncertainty afterward if rates have risen significantly.
How do mortgage points work?
Mortgage discount points are prepaid interest you pay at closing to permanently reduce your loan's interest rate. One point costs 1% of the loan amount — on a $350,000 mortgage, one point costs $3,500 — and typically lowers your rate by 0.20-0.25%. To determine whether buying points makes sense, calculate your break-even period: divide the upfront cost by your monthly savings. For example, $3,500 paid to save $55/month breaks even in about 64 months (5.3 years). If you plan to stay in the home beyond that point, buying points saves money. If you may sell or refinance sooner, keep the cash. Points are tax-deductible in the year of purchase for a primary residence.
When should I consider refinancing my mortgage?
Refinancing makes financial sense when the long-term interest savings exceed the upfront costs. The standard threshold is a rate reduction of at least 0.5-0.75%, though the actual benefit depends on your loan balance and remaining term. Calculate your break-even: if refinancing costs $5,000 and saves $175/month, break-even is about 29 months. You should also consider refinancing to switch from an ARM to a fixed rate for payment certainty, to eliminate PMI if your equity has grown, or to shorten your term from 30 to 15 years to save tens of thousands in interest. Avoid resetting a 25-year-old mortgage back to a new 30-year loan — you may pay more total interest even at a lower rate.
How does the debt-to-income ratio affect mortgage approval?
Lenders measure two debt-to-income ratios to assess affordability. The front-end (housing) DTI divides your total monthly housing costs — principal, interest, property taxes, insurance, and HOA fees — by gross monthly income; most conventional loans cap this at 28%. The back-end (total) DTI adds all other monthly debt obligations (car loans, student loans, credit card minimums) and is typically capped at 36-43% for conventional loans. FHA loans allow back-end DTIs up to 50% for borrowers with strong compensating factors like high cash reserves. For example, earning $7,000/month with a $1,800 mortgage payment and $500 in other debts gives a back-end DTI of 33%, which is comfortably within conventional limits.
References
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer · Editorial policy
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