Mortgage Comparison Calculator – How It Works
The Mortgage Comparison Calculator helps you analyze two different home loan offers using clear, consistent formulas. Instead of relying on headline interest rates alone, the tool shows how each mortgage translates into monthly payments, total interest and overall cost once fees are included.
Both mortgages are treated as standard fixed-rate loans with level monthly payments. For each loan, the calculator uses the same payment and amortization formulas, so the comparison focuses on the underlying math rather than marketing descriptions.
Fixed-Rate Mortgage Payment Formula
For each mortgage, the key inputs are the loan amount P, the annual interest rate converted to a monthly rate r and the total number of monthly payments n. The formula for the fixed monthly payment M is:
The monthly interest rate r is the annual percentage rate divided by 12 and then by 100 to convert from percent to decimal. The term in months is n = years × 12. If the interest rate is exactly zero, the payment simplifies to:
Once the monthly payment is known, the calculator can derive the total paid and total interest for each mortgage over the full term.
Interest And Amortization Relationships
On a fixed-rate mortgage, each monthly payment is split into interest and principal. For a given month with remaining balance B and monthly rate r, the interest part is:
The principal part is the remainder of the payment:
The new balance after the payment is:
In this calculator, total interest is calculated more directly using the relationship between payments and principal over the full term. For each mortgage:
Total interest = Total paid − P
This gives the same result as summing the monthly interest portions from a full amortization schedule.
Including Fees In Total Cost
Many mortgage offers include upfront fees such as processing charges, appraisal fees or points. To see the true cost of each loan, the calculator adds these fees to the total paid over the life of the mortgage:
By looking at total cost instead of payments alone, you can evaluate whether a mortgage with slightly lower monthly payments but higher fees is actually more expensive overall than an alternative with higher payments and lower fees.
Comparing Two Mortgages Step By Step
The comparison process follows the same steps for both loans:
- Convert the annual interest rate into a monthly rate by dividing by 12 and 100.
- Convert the term in years into the number of monthly payments.
- Use the fixed-rate payment formula to calculate the monthly payment M.
- Compute total paid over the life of the loan as M × n.
- Compute total interest as total paid minus the loan amount.
- Add any upfront fees to find the total cost of each mortgage.
After these steps, the calculator compares the total costs of Mortgage 1 and Mortgage 2. The mortgage with the lower total cost is labeled as the cheaper option, and the difference between the two costs is reported.
How To Use This Mortgage Comparison Calculator
- Enter the loan amount, annual interest rate and term in years for Mortgage 1.
- Include any upfront fees associated with Mortgage 1.
- Enter the same details for Mortgage 2 in the right-hand column.
- Choose your preferred number of decimal places for the results.
- Click the compare button to calculate payment, interest and cost for both loans.
- Review which mortgage has the lower payment and which is cheaper in total cost.
Interpreting The Comparison Results
The results section provides several key metrics for each mortgage along with a summary:
- Monthly payment: the regular fixed payment required to amortize the loan over the chosen term.
- Total interest: the cumulative interest paid over the full life of the loan, excluding fees.
- Total cost: all payments plus any upfront fees, representing the full cash outflow from the borrower to the lender and related charges.
- Cheaper mortgage: the loan with the lower total cost.
- Cost difference: the absolute difference between total costs, showing how much you may save by choosing one option over the other.
Beyond The Numbers: Other Factors To Consider
While payment, interest and total cost are central to deciding between mortgages, they are not the only factors that matter. You may also want to consider:
- The flexibility to make overpayments or pay off the mortgage early.
- Prepayment penalties, refinance rules or restrictions.
- Differences in how interest is calculated or compounded.
- Customer service, lender reputation and closing timelines.
This calculator gives a clear financial baseline so you can bring the conversation with lenders beyond headline rates and into total cost over time.
Mortgage Comparison FAQs
Frequently Asked Questions About Comparing Mortgages
Learn how to read the results, when a lower rate is not always cheaper and how fees affect total cost.
A lower interest rate usually means lower payments and less interest, but high upfront fees or a longer term can offset the savings. Comparing total cost, not just the rate, is the best way to see which mortgage is truly cheaper.
Longer terms spread payments over more months. Even though each monthly payment is smaller, interest accrues for more periods, so the total interest paid can end up higher compared with a shorter term at the same rate.
Upfront fees increase the total cost of a mortgage. A loan with a slightly lower rate but significantly higher fees may end up more expensive overall than a loan with a slightly higher rate but lower or no fees. This calculator adds fees to the total cost figure to make that impact visible.