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Which loan option is better for me?

Compare two fixed-rate loan options side-by-side. Find the break-even point to see when one loan becomes cheaper than the other based on upfront costs and total interest.

What This Calculator Is

A loan comparison calculator evaluates two mortgage options side by side, accounting for different interest rates, terms, and points (upfront fees that buy a lower rate). It shows total costs and monthly payments for each option, helping you choose the best loan for your situation.

Who This Calculator Is For

Homebuyers comparing loan offers from multiple lenders, those deciding whether to pay points, and anyone weighing the trade-offs between different loan terms (15-year vs. 30-year). Mortgage professionals use it to help clients make informed decisions.

When to Use This Calculator

Use this calculator when you have multiple loan offers to compare, when deciding whether paying points makes sense, when choosing between different loan terms, or when refinancing and evaluating multiple options.

Inputs

$400,000.00
6.250%
$5,000.00
6.875%
$0.00

Results

Break-Even Period

2 years 7 months

When both options cost the same

RecommendationAfter 2 years 7 months, Option A becomes the better deal
Option A Payment$2,462.87
Option B Payment$2,627.72
Option A Total Cost$491,632.77
Option B Total Cost$545,977.49
Savings Difference$54,344.72

Cost Difference Over Time

At the break-even point (2 years 7 months), both options have cost the same total amount.

Savings, if any, vary based on consumer credit profile, interest rate availability, and other factors.

Insights

Option A costs less

The difference is $54,344.72 over the life of the loan.

Factor in points

If paying points, ensure you'll keep the loan long enough to recoup the upfront cost through lower payments.

Default rates: Federal Reserve Economic Data (FRED), Freddie Mac Primary Mortgage Market Survey

How Loan Comparison Is Calculated

The calculator computes monthly payments and total costs for each option. It then calculates the break-even point — the time at which both loans have cost you the same total amount including upfront points or credits. After this point, one option becomes definitively cheaper.

paymentX = loanAmount * monthlyRateX*(1+monthlyRateX)^termX / ((1+monthlyRateX)^termX - 1) for each option A/B (standard amortization formula; if rate=0, payment = loanAmount/term).
totalInterestX = paymentX*termX - loanAmount; totalCostX = totalInterestX + pointsX (points treated as a flat dollar cost, not amortized or financed).
Break-even: cumulative cost (points + payments made) for A and B tracked month by month; breakEvenMonths = first month where the sign of (cumulativeCostA - cumulativeCostB) flips.
Where: loanAmount, loanTermA/B (years, default 30), rateA/B (annual %), pointsA/B (dollar cost of points, not % of loan).
Assumptions: monthly compounding; standard fixed-rate fully amortizing loans; points are a simple added upfront cost, no tax effect; if no sign flip occurs, cheaper total cost loan wins outright; chart data sampled annually.

Key Takeaways

  • •Points typically make sense if you plan to keep the loan past the break-even point
  • •Credits (negative points) give you cash back but result in a higher rate
  • •Consider how long you realistically expect to stay in the home
  • •If break-even is 5+ years and you might move, the higher rate option may be better
  • •Always compare the same loan term for an apples-to-apples comparison
  • •Factor in tax implications — mortgage interest may be deductible

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