Bankrate Mortgage Loan Calculator Comparison

Mortgage Payment Formulas:

\[ M1 = P \times \frac{r1 \times (1 + r1)^n}{(1 + r1)^n - 1} \] \[ M2 = P \times \frac{r2 \times (1 + r2)^n}{(1 + r2)^n - 1} \]

Loan Principal (P):

Interest Rate 1 (r1):

Interest Rate 2 (r2):

Loan Term (n):

months

Monthly Payment Option 1:

Monthly Payment Option 2:

Monthly Difference:

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1. What is a Mortgage Loan Comparison Calculator?

Definition: This calculator compares monthly payments for two different mortgage loan options with varying interest rates.

Purpose: It helps homebuyers and refinancers 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 option:

\[ M = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( M \) — Monthly payment
\( P \) — Loan principal amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (loan term in months)

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

3. Importance of Mortgage Comparison

Details: Comparing different loan options helps borrowers understand the long-term financial impact of interest rate differences.

4. Using the Calculator

Tips: Enter the loan amount, two different interest rates (as percentages), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why compare two mortgage options?
A: Comparing helps you see how small rate differences affect monthly payments and total interest paid over the loan term.

Q2: Should I always choose the lower rate?
A: Not necessarily - consider closing costs, points, and other loan features along with the rate.

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid over the life of the loan.

Q4: Are these calculations accurate for all loans?
A: This calculates standard fixed-rate mortgages. ARMs or loans with PMI may have different payment structures.

Q5: Does this include taxes and insurance?
A: No, this calculates principal and interest only. Actual payments may include escrow amounts.