How to use the mortgage comparison calculator
- Enter the Loan amount both lenders quoted and the Years you expect to keep the loan before you sell or refinance.
- For Loan A and Loan B, enter the Interest rate, Term (years), Points (%) and Other costs. Page 2 of each Loan Estimate lists points and lender fees.
- Read the headline: it names the loan that costs less over the years you entered. The line below it shows when a loan with higher upfront costs earns them back.
- Check the table for each payment, the interest and balance at your horizon, and the full-term cost.
How the comparison works
Each payment uses the amortization formula M = P × r / (1 − (1 + r)−n), with r the yearly rate divided by 12 and n the number of monthly payments. Upfront cost is points (1 point is 1% of the loan, as the CFPB explains) plus other costs. The cost over your horizon is interest paid in that time plus upfront cost. Principal is not counted as a cost because it builds equity you get back when you sell. Break-even is the first month the loan with higher upfront costs has the lower running total.
Worked example with the default numbers
Both offers are for $350,000 over 30 years. Loan A is 7% with no points and $4,000 in other costs, so it costs $2,328.56 a month and $4,000 up front. Loan B buys the rate down to 6.625% with 1.5 points ($5,250), so it costs $2,241.09 a month and $9,250 up front. Over 7 years Loan A charges $164,615 in interest and Loan B $155,363, so their costs are $168,615 and $164,613: Loan B costs $4,002 less. Its extra $5,250 is earned back after 48 months (4 years). Kept for the full 30 years, Loan B costs $26,239 less.
Limits and edge cases
- Fixed rates only. For an adjustable-rate loan, the result holds only for its fixed period.
- Property tax, homeowners insurance and mortgage insurance are left out. For a full monthly housing payment, use the mortgage calculator.
- Future dollars are not discounted, and money you could invest instead of paying points is not modelled.
- Lender credits (negative points) are not supported; lower Other costs by the credit instead.
- Already have a loan? The mortgage refinance calculator compares it with a new offer, and the amortization schedule calculator shows either loan month by month.
Mortgage comparison FAQ
How do I compare two mortgage offers?
Add each loan's upfront costs to the interest you will pay during the years you expect to keep it, then pick the lower total. The lowest rate is not always cheapest if it comes with large points or fees.
Are mortgage points worth paying?
Only if you keep the loan past the break-even month. In the default example, 1.5 points cut the rate from 7% to 6.625% and are earned back after 48 months. Set the years to 3 and Loan A wins by $1,296.
Why is the break-even shorter than points divided by the payment difference?
The lower-rate loan saves more in interest than in payment, because more of each payment goes to principal. Dividing $5,250 by the $87.47 payment difference gives 60 months, but counting interest saved gives 48.
Is a 15-year or 30-year mortgage better?
A 15-year loan usually has a lower rate and far less interest, but a higher payment. On $350,000, a 30-year loan at 7% costs $2,328.56 a month and a 15-year loan at 6.25% costs $3,000.98, yet total interest falls from $488,281 to $190,176.
Does this include taxes and insurance?
No. It compares principal, interest, points and closing costs. Property tax and homeowners insurance are the same whichever loan you choose, but mortgage insurance can differ, so check each Loan Estimate.
Sources: CFPB, discount points and lender credits; CFPB, Loan Estimate explainer; Freddie Mac mortgage rate survey (weekly 30-year fixed average; the calculator's rates are examples, so use the rates on your own offers).