This loan comparison calculator compares two mortgage offers over the same holding period using payments, fees and remaining balances. Use the calculator above first, then read on: the worked example shows why a lower payment can still be the more expensive loan, the sensitivity case puts a rate on both offers so the horizon cost can be compared, and the troubleshooting section covers the APR and fee details this arithmetic deliberately leaves to the disclosures.
Contents:
- How this loan comparison calculator works
- Worked example: $100,000 at 0% over 120 versus 240 months
- What to enter, and what each input does
- What moves the result most
- When the result looks wrong
- Your next-steps checklist
- Limitations
- Frequently asked questions
- Sources
How this loan comparison calculator works
The cheapest monthly payment is often the most expensive loan. This tool compares two offers at the same horizon — payments, remaining balances and the true borrower cost — so a longer term cannot hide behind a lower payment.
Each loan is amortized from the same starting amount. Payment = amount × r ÷ (1 − (1 + r)−n), where r is the monthly rate and n is the term in months. After the horizon months, the balance is taken from the schedule. Borrower cost to that horizon = fees + payments made + remaining balance − original principal, which equals interest plus fees over the horizon.
Keep note rates separate from APR here. APR is not invented from note rate plus fees in this tool: APR computation depends on fee classification and timing rules that vary, so use the APR on each lender’s Loan Estimate for that comparison.
Worked example: $100,000 at 0% over 120 versus 240 months
This is an illustrative example using the calculator’s own worked case, deliberately set at 0% so the balance effect is visible without interest. It is not a market rate. Inputs: both offers $100,000, both at 0%, Offer A over 120 months, Offer B over 240 months, no fees on either, compared at month 60.
Offer A payment = $100,000 ÷ 120 = $833.33 per month. Offer B payment = $100,000 ÷ 240 = $416.67 per month. After 60 months, Offer A balance = $50,000 and Offer B balance = $75,000. Interest and fee cost is $0 for both at 0%.
The payment difference is entirely a balance difference, which is the point the horizon table makes visible: Offer B’s borrower pays $416.66 less each month but still owes $25,000 more at month 60. At a positive rate, that balance gap would also carry an interest cost, as the sensitivity case below shows. Judging these two offers by payment alone would call Offer B the cheaper loan; judging them by payment plus balance at the horizon shows they are two different ways of repaying the same principal.
Use the Load worked example button above to reproduce this case in the form, then change one input at a time to see what drives the result.
What to enter, and what each input does
Loan amount (both offers). Enter the amount both offers are for. Comparing offers on different loan amounts answers a different question from comparing two offers for the same borrowing, so keep this figure identical across the pair.
Each offer’s interest rate, term and fees. Enter the note rate, term in months, and fees for Offer A and for Offer B separately. The note rate prices interest on the loan; it is not the APR, which also reflects certain fees and costs over the loan term and must be taken from each Loan Estimate.
Compare after (horizon in months). Enter the month at which both loans are compared — for example, the month you expect to sell or refinance. Balances and borrower costs compared at different horizons are not comparable, so use the same horizon for every pair you test, and choose a horizon you actually expect to reach.
What moves the result most
Starting from the same $100,000 amount and 60-month horizon, but with both offers at 6% instead of 0% and no fees, the horizon comparison gives:
| Offer at 6%, compared at month 60 | Monthly payment | Remaining balance | Borrower cost to month 60 |
|---|---|---|---|
| Offer A: 120 months | $1,110.21 | $57,425.61 | $24,038.21 |
| Offer B: 240 months | $716.43 | $84,899.66 | $27,885.46 |
At 6%, the lower payment is now genuinely more expensive to month 60, by $27,885.46 − $24,038.21 = $3,847.25 in borrower cost, even though Offer B costs $393.78 less per month. The longer term leaves $27,474.05 more balance outstanding at the horizon, and that balance is money still owed, not money saved. Fees work the same way in reverse: a higher-fee, lower-rate offer can win or lose depending on the horizon, because fees are paid up front while rate savings accrue monthly — which is exactly what the borrower-cost column is designed to show.
When the result looks wrong
The lower-payment offer looks worse overall. That is often correct, not an error: the horizon cost counts the remaining balance, and a longer term leaves more balance outstanding. Check the balance column before concluding the tool has swapped the offers.
The lower-rate offer loses at a short horizon. That is also possible: its fees are paid in full up front, while its rate saving has had only a few months to accrue. Lengthen the horizon to the period you actually expect to hold the loan and re-check; do not lengthen it artificially just to make one offer win.
The APR ranking differs from this tool’s ranking. APR and horizon borrower cost answer different questions: APR spreads fees over the full term under disclosure rules, while this tool measures cost to your chosen horizon. Use the Loan Estimate APR for the disclosure comparison and this tool for the horizon comparison, and note where they disagree rather than forcing them to agree.
One offer’s payment looks wrong on its own. Check that its term was entered in months, not years — this calculator asks for months — and that its rate is the note rate, not the APR. Either mix-up changes the payment and the balance together.
Your next-steps checklist
- Run this loan comparison calculator with both offers on the same loan amount, at the horizon you actually expect to sell or refinance.
- Read the borrower-cost column, not the payment column, for the overall answer, and the balance column for what you would still owe at the horizon.
- Check each offer’s full monthly payment, including tax, insurance, HOA and PMI, with the mortgage calculator.
- Compare each offer’s APR, points and program features from its Loan Estimate, since points, rate-lock timing, prepayment terms, PMI and escrow are not modelled here.
- Test the same pair at a shorter and a longer horizon, and note whether the winner changes; if it does, the horizon assumption is deciding the answer.
- If you are refinancing rather than buying, run the same comparison through the refinance calculator, including fees and the remaining balance on the current loan.
Limitations
APR is not invented from note rate plus fees here: APR computation depends on fee classification and timing rules that vary, so use the APR on each lender’s Loan Estimate for that comparison. Points, rate-lock timing and program features (prepayment, PMI, escrow) must be compared from the disclosures, not from this arithmetic alone. Adjustable rates, program rules and closing timelines are not modelled. Results are estimates only and are not a loan offer, pre-approval or financial advice.
Frequently asked questions
Why compare at a horizon instead of full term?
Because most borrowers do not hold a loan to term. The horizon comparison reflects the cost if you sell or refinance at that point.
What if one offer has higher fees but a lower rate?
That is exactly what borrower cost captures: fees are paid up front, rate savings accrue monthly. The horizon table shows which wins by your horizon.
Is the lower payment ever the right choice?
Yes — for cash-flow reasons, even when total cost is higher. This tool separates cheaper per month from cheaper overall so you can choose knowingly.
Why is borrower cost not just total payments?
Because total payments alone ignore the balance still owed at the horizon. Borrower cost adds that balance back and subtracts the original principal, so it equals interest plus fees over the horizon.
Should I use note rate or APR here?
Note rate: this tool amortizes from the note rate. Use the Loan Estimate APR as a separate, disclosure-based comparison, not as an input here.
Sources
- Bank of America — Mortgage calculator (scope reference preserved from the original page; the horizon borrower-cost method above is this site’s own calculation, not Bank of America’s).
- Consumer Financial Protection Bureau — Owning a home (general background on comparing Loan Estimates).
Estimates only. Results from this calculator are not a loan offer, appraisal, engineering design, equipment selection or contractor quote.