1. What is Mortgage Comparison?

This calculator compares two mortgage loans side by side, showing the monthly payment for each and the difference between them. It helps borrowers evaluate different loan options to make informed financial decisions.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula for each loan:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (years × 12)

Explanation: The formula calculates the fixed monthly payment required to fully amortize a loan over its term.

3. Importance of Loan Comparison

Details: Comparing mortgage options helps identify the most cost-effective loan, considering both interest rates and loan terms. Even small differences in rates can result in significant savings over time.

4. Using the Calculator

Tips: Enter principal amount in USD, annual interest rate in percent, and loan term in years for both loans. The calculator will show monthly payments and the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: Why compare two mortgages?
A: Comparing helps you understand how different interest rates or loan terms affect your monthly payment and total interest paid.

Q2: Should I always choose the loan with lower monthly payment?
A: Not necessarily. Consider total interest paid, loan term, and any fees. A slightly higher payment might save money long-term.

Q3: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Actual mortgage payments often include escrow for taxes and insurance.

Q4: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms lower monthly payments but increase total interest.

Q5: Can I compare fixed and adjustable-rate mortgages?
A: This calculator works best for comparing fixed-rate loans. ARMs require more complex calculations for accurate comparison.