Mortgage Calculator Payment 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:

Interest Rate 1:

Interest Rate 2:

Loan Term:

years

Monthly Payment 1:

Monthly Payment 2:

Difference:

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From:	To:

1. What is a Mortgage Payment Comparison Calculator?

Definition: This calculator compares monthly mortgage payments for two different interest rates on the same loan amount and term.

Purpose: Helps homebuyers and refinancers evaluate how interest rate changes affect their monthly payments.

2. How Does the Calculator Work?

The calculator uses standard mortgage payment formulas:

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

Where:

\( M \) — Monthly payment (USD)
\( P \) — Loan principal (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (term in years × 12)

Explanation: The formula accounts for both principal and interest payments over the loan term.

3. Importance of Payment Comparison

Details: Comparing payments helps borrowers understand the financial impact of rate differences when shopping for loans or considering refinancing.

4. Using the Calculator

Tips: Enter the loan amount, two different interest rates, and loan term. The calculator shows both monthly payments and the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: Why compare two interest rates?
A: Comparing rates helps you evaluate loan offers or understand how rate changes affect affordability.

Q2: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid over the life of the loan.

Q3: What's included in the monthly payment?
A: This calculates principal and interest only. Taxes and insurance would be additional.

Q4: How accurate is this calculator?
A: It provides precise calculations for fixed-rate mortgages. ARM loans would require more complex calculations.

Q5: What's a good interest rate difference to compare?
A: Even 0.25% differences can significantly impact payments over a 30-year term.