Compare Two Mortgages

What is mortgage comparison?

Mortgage comparison is the practice of putting two or more loan offers — or two possible futures for the same loan — on one set of units so the real difference is visible. The variables are loan amount, interest rate, term, down payment, points, and lender fees, and each one moves either your monthly payment or your lifetime cost or both. A comparison that changes three of them at once tells you nothing, which is why the discipline is to alter one variable per run and read only the delta.

When you are shopping actual offers, the comparison runs on five factors: the interest rate, the annual percentage rate, the points, the lender fees, and the lender's service and lock terms. The rate is what your payment is priced on. The APR folds the points and lender fees back into the rate so two quotes can be judged on the same basis — a 6.25% rate carrying 2 points and $1,095 of fees has an APR near 6.47%, and that gap tells you how much of the headline discount was charged back to you up front.

The arithmetic rewards attention. On a $400,000, 30-year loan, one quarter of a percent of rate is $65.40 a month and $23,545 over the full term; half a percent is $130.07 a month and $46,825. Four lenders quoting between 6.25% and 6.625% on the same $400,000 file span $98.37 a month and $26,970 of total cost — a gap larger than the price of the appraisal, the inspection, and the moving truck combined. That is the case for shopping: federal rules require each lender you apply with to deliver a Loan Estimate within 3 business days of your application, so collecting three to five of them costs you almost nothing and sets the numbers side by side in the same format.

Rate context matters too. The benchmark for the worked examples on this page is a 6.50% 30-year fixed rate, and every figure below is built on a $400,000 loan unless stated otherwise. Rates move daily; check the mortgage rates page for the current quote before you rely on any specific number here.

How to use this calculator

1. Fill in scenario one: home price, down payment, interest rate, and loan term. This is your first offer or your current loan.
2. Fill in scenario two with the second offer — same home price and down payment, different rate, points, or term.
3. Calculate to see both monthly payments, both total interest figures, and the difference between them.
4. Change one variable at a time. Swap only the rate to price the rate gap, then swap only the term to price the term, then only the down payment.
5. Multiply each payment by the number of payments — 360 on a 30-year loan — to convert a monthly difference into a lifetime difference.

A realistic set of inputs for 2026: scenario one at a $500,000 home price, $100,000 down (a $400,000 loan), 6.50% interest rate, and a 30-year term produces a principal-and-interest payment of $2,528.27. Scenario two with the identical price and down payment but a 6.25% rate produces $2,462.87 — a difference of $65.40 a month, $784.80 a year, and $23,545 across 360 payments. Run a third pass at 15 years and the payment jumps to $3,484.43 while lifetime interest falls to $227,197 from $510,178. For qualification rather than pricing, the same payment belongs against your gross income in the debt-to-income calculator.

How mortgage comparison is calculated

Every scenario reduces to one payment calculation run at a time, then subtracted from the other. The lender divides the annual rate by 12 to get a monthly rate and solves for the level payment that exhausts the balance over the term.

M = P × [ i (1 + i)ⁿ ] ÷ [ (1 + i)ⁿ − 1 ]

M is the monthly principal and interest payment, P is the loan amount, i is the monthly rate (annual ÷ 12), and n is the number of payments. APR is then solved from the same payment applied to a smaller amount: the amount financed equals the loan minus points and lender fees.

Worked example: $400,000 at 6.50%, then the same loan at 6.25%

Step 1: monthly rate = 6.50% ÷ 12 = 0.005416667. Step 2: n = 30 × 12 = 360. Step 3: the compounding factor (1 + 0.005416667)³⁶⁰ = 6.991798. Step 4: 400,000 × 0.005416667 × 6.991798 = 15,148.90, and 6.991798 − 1 = 5.991798, so M = 15,148.90 ÷ 5.991798 = $2,528.27. Step 5: repeat at 6.25% (monthly rate 0.005208333, factor 6.489162) and the payment is $2,462.87, so the rate gap is worth 2,528.27 − 2,462.87 = $65.40 a month. Step 6: lifetime difference = 65.40 × 360 = $23,545 of interest, which matches the totals directly: $510,178 − $486,633 = $23,545.

Step 7 prices the APR. A quote of 6.25% with 2 points and $1,095 of lender fees charges $9,095 up front, so the amount financed is 400,000 − 9,095 = $390,905 while the payment stays $2,462.87. Solving the same formula for the rate that amortizes $390,905 in 360 payments of $2,462.87 gives an APR of 6.47% — 22 basis points above the note rate. On the 6.50% quote with $1,295 of fees, $398,705 amortizes to $2,528.27 at 6.53%, only 3 basis points over the note rate. The APR comparison therefore narrows a 25-basis-point rate gap to a 6-basis-point gap, and the loan with the cheaper headline rate is still ahead — but by far less than the marketing suggested.

Worked scenarios

Three tables cover the decision: what each lender is actually offering, what each offer costs over the full term, and what a rate move alone is worth on this loan size.

Four offers on a $400,000, 30-year fixed loan

Meridian has the lowest rate by 37.5 basis points but also the highest entry cost: $9,095 of points and fees against Northline's $650. Expressed as break-even, Meridian needs $7,800 more at closing than Summit and returns $65.40 a month — 119 months, or 9 years 11 months, before it pulls ahead. Summit, meanwhile, charges $645 more than Northline up front and returns $32.97 a month, crossing over after just 20 months. The cheapest rate is not automatically the cheapest loan, and the cheapest APR is not automatically the cheapest loan either: it is the cheapest loan only if you keep it long enough for the monthly savings to outrun the upfront cost.

Total cost over the full 30-year term

Total paid here is the $400,000 principal plus interest plus points plus fees. The spread from first to last is $26,970 — Meridian at $895,728 against Northline at $922,698 — which is 6.7% of the amount borrowed. Summit sits in the middle at $911,473 and beats Northline by $11,225 while requiring only $645 more cash at the table. Over a full term the ordering is stable: buy down if you will hold, keep your cash if you will not.

What a rate move alone is worth on $400,000

Each quarter-percent is about $65 a month. Note the asymmetry: going down half a percent saves $46,825 while going up half a percent costs $47,858, because interest compounds on the payment you cannot make. If your scenario two in the calculator shows a term change instead of a rate change, the same loan at 15 years costs $3,484.43 a month but retires in 180 payments with only $227,197 of interest — $282,981 less than the 30-year. Run the term swap in both directions and read the 15-year vs 30-year comparison for the decision factors that are not arithmetic.

Key details

• Interest rate: the price of borrowing, applied monthly to the outstanding balance. On $400,000, 0.25% is $65.40 a month and 0.50% is $130.07 a month — $23,545 and $46,825 over 360 payments.
• APR: the rate plus points and lender fees, solved over the full term. It is the like-for-like number. On the four offers above, a 37.5-basis-point rate spread narrows to 17 basis points of APR once $9,095 of entry cost is counted.
• Points: 1% of the loan paid at closing to buy about 0.25% of rate — $4,000 for $65.40 a month on $400,000, break-even at 61 months. Model them with the mortgage points calculator.
• Lender fees: origination, underwriting, processing, and discount charges. Expect roughly $650 to $1,500 on a conventional $400,000 loan; third-party costs such as appraisal, title, and recording are separate and largely the same at every lender.
• Loan Estimate: each lender must give you this standardized form within 3 business days of application. Collect three to five inside a two-week window so the credit inquiries count as one, and compare them on the same day — rate sheets move daily.
• Rate lock: 30 to 60 days is standard, longer for a construction or new-build closing. Confirm the lock length, the extension cost, and the float-down policy before you apply, and check whether the quoted rate assumes a 45-day or a 60-day lock.
• Service and reputation: who services the loan after closing, how escrow shortages are handled, and how the lender behaves when a condition slips. A rate advantage of $32 a month is erased by a two-week closing delay or a missed escrow analysis.

Mortgage comparison tips for 2026

1. Shop three to five lenders inside 14 days. Applications in a short window count as a single inquiry for scoring, and the quotes arrive in comparable form. Collect them on one day: Tuesday's Loan Estimate against last month's flyer is not a comparison, it is a memory.
2. Normalize every quote to the same points and lock. Ask each lender for the rate with zero points and the rate with one point, on the same loan amount and lock period. A 6.25% quote with 2 points against a 6.375% quote with none is not a 0.125% win — the first requires $8,000 more at closing for $32.61 a month.
3. Read the APR against the note rate, then verify what is inside it. A wide gap means points and fees are doing heavy lifting. Ask which costs are inside the APR and which are not; appraisal, title, and recording are excluded by rule, so a low APR does not mean a cheap closing.
4. Put the payment through qualification, not enthusiasm. Hold total housing at 28% of gross monthly income and total debt at 36% as your own limits. On $12,000 gross monthly that is $3,360 for housing — the $2,528.27 payment plus taxes and insurance fits; on $8,000 it does not. Check both ratios in the affordability calculator.
5. Negotiate fees before negotiating rate. Lender fees are more flexible than the rate sheet on a given morning. A $300 reduction in origination charges matches four and a half months of a 0.025% rate improvement, and it is granted more often. Get the concession in writing on the revised Loan Estimate.
6. Do not plan around a future refinance. Closing costs run 2% to 5% of the loan amount — $8,000 to $20,000 on $400,000 — so the offer you sign must be affordable for years without rates falling. Treat any later refinance as upside, and price what a drop would actually be worth in the refinance calculator.

Common mistakes

• Comparing the rate alone. The lowest rate on the board was 6.25% at Meridian with 2 points and $1,095 of fees — $9,095 at the table. Its APR is 6.47%, not 6.25%, and its break-even against a no-point quote is 119 months. Always compare APR and cash to close alongside the rate.
• Comparing quotes taken weeks apart. Rate sheets change between visits, and a quote that has aged a month may be 0.125% to 0.25% off the current market — $32.79 to $65.40 a month on this loan. Re-price every offer on the same day before you choose.
• Judging a 15-year by its total interest alone. The 15-year saves $282,981 in interest and costs $956.16 more every month. If that payment strains the budget through a job change, the cheaper lifetime cost is irrelevant — the loan's job is to be payable in 360 individual months, not on average.
• Ignoring third-party costs that do not change. Appraisal, title, and recording are close to identical across lenders, so a comparison that includes them adds noise. Isolate the lender-controlled items — rate, points, origination, underwriting — and compare those.
• Extending the rate lock without asking the price. Locks run 30 to 60 days; if closing slips past the expiration, an extension often costs 0.125% to 0.25% of the loan — $500 to $1,000 on $400,000. Confirm the extension fee and the float-down terms in writing before you lock.
• Picking on payment size instead of total cost. The lowest payment among these four offers is $2,462.87, but it also carries the highest upfront cost; the lowest total cost over 30 years is $895,728. Choose the metric that matches your hold period, and if you might move within seven years, weight cash to close more heavily than lifetime interest.

Frequently asked questions

What is the difference between an interest rate and an APR? The interest rate prices your monthly payment — on $400,000 at 6.50% that is $2,528.27. The APR adds points and lender fees and restates them as a rate over the full term. A 6.25% rate with $9,095 of upfront cost shows a 6.47% APR, which is the honest number for comparing it against a 6.50% quote with $1,295 of fees.

How many lenders should I compare? Three to five is the working number. Each must send a Loan Estimate within 3 business days of your application, and applications filed within about 14 days count as a single credit inquiry. Collect them the same day so you are comparing today's rate sheet against today's rate sheet rather than against a quote that has gone stale.

How much is it worth to shop around? On a $400,000, 30-year loan, a 0.25% rate difference is $65.40 a month and $23,545 over the term; 0.50% is $130.07 a month and $46,825. The four offers in the table above span $98.37 a month and $26,970 of total cost — more than most buyers spend on the entire inspection and appraisal package.

What is a rate lock and how long does it last? A lock guarantees the quoted rate while your loan closes, typically for 30 to 60 days. Before locking, confirm the expiration date, the cost of an extension (often 0.125% to 0.25% of the loan), and whether a float-down lets you take a lower rate if the market drops before closing.

Are the lowest-rate offers always the cheapest? No. The 6.25% offer in our table costs $9,095 in points and fees and needs 119 months to pull ahead of the 6.50% no-point quote. If you sell or refinance before month 119, the higher-rate, no-point loan is cheaper. Compare APR and total paid at your expected hold period, not the headline rate.

Should I choose the mortgage with the lowest monthly payment? Not automatically. A lower payment usually means a longer term or a higher rate, both of which raise total interest. On $400,000 the 30-year payment is $2,528.27 and the 15-year is $3,484.43 — the 15-year costs $956.16 more a month and saves $282,981. Pick the payment you can sustain for every month of the term, then optimize cost from there.

Do I lose anything by applying to several lenders? Within a roughly 14-day shopping window the credit inquiries merge into one scoring event. You do give each lender permission to verify your credit and income, and you will complete several applications, but the standardized Loan Estimate format makes the returned numbers directly comparable — which is precisely the point.

What if two offers are nearly identical? When the rate, APR, points, and fees land within a few basis points, compare the terms: lock length and extension cost, float-down policy, whether the lender services the loan, how they handle escrow shortages, and their typical closing timeline. On a $400,000 loan a $65.40 monthly advantage disappears quickly if closing slips or conditions are mishandled.

Related calculators

• Mortgage Calculator — full payment with taxes, insurance, and PMI
• Mortgage Rates — current benchmark rates by term
• 30-Year Mortgage Calculator — amortization and lifetime interest
• Refinance Calculator — compare a new loan to your current one
• Affordability Calculator — what the payment qualifies for
• Debt-to-Income Calculator — the ratios lenders qualify on