Overview
A side-by-side loan comparison that runs two rate-and-term offers against the same principal and shows each one's monthly payment and total cost, then states which offer is cheaper overall and by how much. It answers the classic trade-off — lower monthly payment versus less total interest — with real numbers.
How It Works
Enter one loan amount shared by both offers. For Offer A and Offer B, set an interest rate on a slider from 0 to 25 percent in 0.05 steps and a term from 1 to 40 years. The results grid shows each offer's monthly payment and total cost, a 'cheaper overall' verdict with the exact saving in currency, and which offer has the lower monthly payment. Defaults illustrate the common case: 6.5 percent over 30 years versus 5.8 percent over 20.
Step-by-Step Usage Guide
- Enter the loan amount both offers are based on.
- Set Offer A's rate and term with its sliders.
- Set Offer B's rate and term.
- Read the monthly payments, total costs, and the overall saving verdict.
Technical Specifications & Standards
Both offers are priced with the standard amortized-payment formula: payment = P × r × (1+r)^n / ((1+r)^n − 1), with r the monthly rate and n the months, and a zero-rate fallback of P / n. Total cost is simply the payment multiplied by the number of payments, so the comparison assumes every installment is made on schedule with no prepayments, no fees, no insurance, and no rate resets. Notice what the defaults demonstrate: the 20-year offer at 5.8 percent wins on total cost by a wide margin, while the 30-year offer wins on monthly payment — the tool reports both winners honestly rather than declaring a single victor, because which offer is 'better' depends on cash-flow constraints the arithmetic cannot know. Also be aware the principal is shared: you cannot compare different loan amounts here, only different rate and term combinations on the same amount. If you want amortization detail rather than a two-way comparison, the EMI calculator in the same category provides a year-by-year schedule for a single loan.
Targeted Use Cases
- Choosing between a shorter, lower-rate mortgage and a longer, higher-rate one.
- Pricing a rate buy-down: how much total interest a 0.7 point reduction saves over 20 versus 30 years.
- Comparing refinance offers against your current loan's remaining rate and term.
- Showing a co-borrower the real cost difference behind 'smaller monthly payment' marketing.
Notes & Gotchas
- Keep the amount identical for both offers; the tool assumes a shared principal.
- Judge both verdicts — cheapest overall and lowest monthly — against what your budget can carry.
- Add fees mentally; origination and closing costs are outside the model.
- Match terms to your realistic holding period if you plan to move or refinance early.
Frequently Asked Questions
How is each offer's monthly payment computed?
With the standard reducing-balance formula payment = P × r × (1+r)^n / ((1+r)^n − 1), where r is the monthly rate and n the number of months. Total cost is that payment times the payment count.
Can the two offers have different loan amounts?
No. The tool takes one amount and applies both rate and term combinations to it, which keeps the comparison like-for-like. To compare different amounts, run the comparison twice or use the EMI calculator.
Does it include fees, points, or prepayments?
No. The model prices clean fixed-rate amortization only. Origination fees, points, insurance, early-repayment charges, and any extra payments you plan are outside the arithmetic, so add them to the lender's figures yourself.
Why does the cheaper-total offer sometimes lose on monthly payment?
Shorter terms usually cost more per month but far less in total interest, and the reverse holds for longer terms. The tool reports both dimensions and names a winner on each, because the right choice depends on your cash flow, not on the math alone.