OneTaskBy Tim King · Updated
Mortgage Comparison Calculator
Which Home Loan Costs Less Once Fees Count Over Your Holding Period
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How the Mortgage Comparison Calculator works
This mortgage comparison calculator puts two home loans side by side. A lower rate with high fees can cost more than a higher rate with none, depending on how long you keep the loan, so it totals interest and fees over the years you expect to hold it and gives each loan an effective rate.
Mortgage comparison calculator formula
For each loan the calculator works out the repayment, runs the balance forward month by month for the holding period, and totals the cost:
Cost = interest paid over the period + upfront fees + monthly fees Effective rate = the rate at which the cash you receive equals all payments plus the balance still owed
The effective rate is similar in spirit to a comparison rate, but it uses your holding period instead of a fixed assumed loan size and term.
Worked example: over five years
On 500,000 over 30 years, Loan A is 6.0% with a 10 monthly fee and Loan B is 5.8% with 3,000 upfront. Repayments are 2,997.75 and 2,933.77. Over 5 years Loan A costs 145,736.94 in interest and fees and Loan B 143,132.76, so Loan B is cheaper by 2,604.18. Effective rates are 6.02% and 5.94%.
Worked example: over one year
Keep the same loans for just one year and the answer flips. Loan A costs 29,952.97 and Loan B 31,832.36, because the 3,000 fee has not been earned back, so Loan A is cheaper by 1,879.39. Over one year Loan B's effective rate rises to 6.42%.
Mortgage repayment and interest reference table
Monthly repayment and total interest on 400,000 over 30 years at each rate.
| Rate | Monthly repayment | Total interest over 30 years |
|---|---|---|
| 4.00% | 1,909.66 | 287,478 |
| 4.25% | 1,967.76 | 308,393 |
| 4.50% | 2,026.74 | 329,627 |
| 4.75% | 2,086.59 | 351,172 |
| 5.00% | 2,147.29 | 373,023 |
| 5.25% | 2,208.81 | 395,173 |
| 5.50% | 2,271.16 | 417,616 |
| 5.75% | 2,334.29 | 440,345 |
| 6.00% | 2,398.20 | 463,353 |
| 6.25% | 2,462.87 | 486,633 |
| 6.50% | 2,528.27 | 510,178 |
| 6.75% | 2,594.39 | 533,981 |
| 7.00% | 2,661.21 | 558,036 |
| 7.25% | 2,728.71 | 582,334 |
| 7.50% | 2,796.86 | 606,869 |
| 7.75% | 2,865.65 | 631,634 |
| 8.00% | 2,935.06 | 656,621 |
| 8.25% | 3,005.07 | 681,824 |
| 8.50% | 3,075.65 | 707,235 |
| 8.75% | 3,146.80 | 732,849 |
Quick answers
- A 0.25% lower rate on 500,000 saves about 1,250 a year in interest.
- An upfront fee matters most if you refinance or sell early.
- A 10 monthly fee is 3,600 over 30 years.
- The effective rate includes fees; the headline rate does not.
- Compare over the years you will really keep the loan, not the full term.
- Divide an upfront fee by the monthly saving to see how many months it takes to earn back: 3,000 at 50 a month is 60 months.
FAQ
Is a lower rate always cheaper?
No. Upfront fees can outweigh a lower rate if you keep the loan for only a few years. The calculator finds which loan is cheaper for your holding period.
What fees should I include?
Application, establishment, valuation and settlement fees go in upfront fees. Ongoing account or package fees go in monthly fees, and a yearly fee can be divided by 12.
What is the effective rate?
It is the single rate that makes the money you actually receive, after upfront fees, equal to everything you pay back over the period, including the balance left at the end. It lets loans with different fee structures be compared on one number.
See also: all Property tools, Pay, Bills, Debt, Investing, Saving.
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