This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.
Rate alone does not tell you the cost
Lenders compete on headline interest rates, but two loans with different rates, fees and insurance can end up costing very different amounts. A lower rate often comes with discount points or higher fees paid upfront. Whether that trade is worth it depends on how long you keep the loan. This calculator lays two offers side by side and shows the total cost of each, and how many months it takes for higher fees to pay for themselves.
What the calculator compares
For each offer:
- Monthly payment, from the standard amortization formula, plus any monthly mortgage insurance.
- Total cost of credit: all interest over the term, plus upfront fees and points, plus total insurance.
- Break-even time: extra fees ÷ monthly savings, when one offer has higher fees but a lower payment.
Worked example
You borrow $350,000 for 30 years and receive two offers:
| Offer A | Offer B | |
|---|---|---|
| Interest rate | 6.5% | 6.125% |
| Fees and points | $3,000 | $7,000 |
| Monthly payment | $2,212.24 | $2,126.64 |
| Total interest over 30 years | $446,406 | $415,589 |
| Total cost of credit | $449,406 | $422,589 |
Offer B costs $4,000 more upfront but saves $85.60 a month. The extra fees are recovered after about 47 months, just under 4 years. If you keep the loan for the full term, offer B saves about $26,816. If you expect to sell or refinance within 4 years, offer A is cheaper.
Discount points
One point costs 1% of the loan amount and typically lowers the rate by around 0.25 percentage point, though it varies by lender and market. Points paid on a mortgage for your main home are often tax-deductible, which shortens the break-even time slightly. Some lenders offer the reverse, lender credits: a higher rate in exchange for lower closing costs.
Mortgage insurance
With less than 20% down on a conventional loan, lenders usually require private mortgage insurance (PMI), typically about 0.3% to 1.5% of the loan amount per year. It can be cancelled once you reach 20% equity, and must end automatically at 22% under the Homeowners Protection Act. FHA loans charge their own mortgage insurance premium with different rules. Enter the monthly amount for each offer to include it in the comparison.
Comparing fairly
- Use the Loan Estimate each lender must give you within three business days of your application. Its standard format makes offers easy to compare line by line.
- Compare offers on the same day, since rates move daily, and check how long each rate lock lasts.
- Look at the APR, which spreads fees over the full term, but remember it assumes you keep the loan to the end.
- Consider shorter terms too: a 15-year loan has a higher payment but a lower rate and far less total interest. You can enter different terms in each offer.