Hong Life CalculatorsUnderstanding the mortgage comparison calculator — concept and principle
This calculator compares up to three fixed-rate mortgage offers on what they actually cost you for the number of years you expect to keep the loan. It adds the interest you pay in that time to the upfront points and fees, so offers with different rates, fees and terms can be ranked fairly.
How it is calculated
- Monthly payment = P × r ÷ (1 − (1 + r)^−n), with r = annual rate ÷ 12 and n = months.
- Each month, interest = balance × r; the rest of the payment reduces the balance.
- Cost while you keep it = interest paid over your holding period + points and fees.
- Interest over the full term = payment × n − P, shown for reference.
The principle
When you sell or refinance, you repay the remaining balance; the principal you paid down is not a cost, because it stays in your home equity. The real cost of a mortgage over your holding period is therefore the interest paid plus upfront charges. Paying points buys a lower rate, so it pays off only if you keep the loan long enough for the monthly interest savings to exceed the fee. A shorter term has a higher payment but much lower interest, because the balance falls faster.
Worked example
Default inputs: 320,000 USD; A 6.25% for 30 years, no fees; B 5.875% for 30 years, 6,400 USD fees; C 5.5% for 15 years, 3,000 USD fees; kept 7 years.
- Payments: A 1,970.30 USD, B 1,892.92 USD, C 2,614.67 USD.
- Interest + fees over 7 years: A 133,612.27 USD, B 131,606.68 USD, C 105,330.05 USD.
- Cheapest while you keep it: Mortgage C. Saving vs the costliest (A) = 28,282.22 USD.
- Over the full term, interest would be A 389,306.21 USD, B 361,451.50 USD, C 150,640.07 USD.
| Mortgage A: rate (% a year) | Saving vs the costliest option |
|---|---|
| 1.56 | $99,887.64 |
| 3.12 | $66,852.29 |
| 4.69 | $32,794.12 |
| 6.25 | $28,282.22 |
| 7.81 | $63,575.43 |
| 9.38 | $99,159.77 |
| 12.5 | $170,636.62 |
How to read the result
Pick the lowest cost for a realistic holding period, then check that you can afford the monthly payment. C wins here but needs about 644 USD more a month than A. B beats A over 7 years, but over a much shorter period its fees might not be recovered; try changing the years to find the break-even.
Common mistakes
- Comparing only the interest rate or only the payment.
- Treating principal repayment as a cost.
- Assuming you will keep the loan for 30 years when most people move or refinance sooner.
- Forgetting mortgage insurance, taxes and homeowners insurance, which are excluded here.
Frequently asked questions
Are mortgage points worth it?
Only if you keep the loan beyond the break-even point where monthly savings repay the points.
Is a 15-year mortgage cheaper than a 30-year?
Usually in total interest, but the payment is higher. Make sure it fits your budget.
Why compare over a holding period?
Because the remaining balance is repaid at sale or refinance, so only interest and fees paid so far are true costs.
Sources: Consumer Financial Protection Bureau, Loan Estimate explainer and "What are discount points?" · Fannie Mae, Selling Guide (amortization basics)