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Mortgage Comparison:
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The mortgage comparison calculator helps you compare two different loan options by calculating the total cost difference between them. It considers loan amount, interest rate, and term to determine which loan is more economical in the long run.
The calculator uses the standard mortgage formula:
Where:
Explanation: The calculator computes the total cost of each loan by multiplying the monthly payment by the number of payments, then compares the two totals.
Details: Comparing mortgage options helps borrowers understand the long-term financial impact of different interest rates and loan terms, potentially saving thousands of dollars over the life of the loan.
Tips: Enter the loan amount, interest rate, and term for both loans. The calculator will show the total cost difference between the two options.
Q1: Why compare total cost instead of just monthly payments?
A: A lower monthly payment might result in higher total costs if the loan term is extended. Comparing totals gives the complete financial picture.
Q2: Does this include taxes and insurance?
A: No, this calculator only compares principal and interest payments. Taxes and insurance would add to both loans similarly.
Q3: How significant is a 0.25% rate difference?
A: On a 30-year $300,000 loan, a 0.25% rate difference amounts to about $15,000 in total interest over the life of the loan.
Q4: Should I always choose the loan with lower total cost?
A: Not necessarily. Consider your cash flow needs, how long you plan to stay in the home, and potential early payoff scenarios.
Q5: Can I compare adjustable-rate mortgages (ARMs)?
A: This calculator is designed for fixed-rate loans. ARM comparisons require more complex calculations accounting for rate changes.