Which mortgage is better for me?

Once you've found the perfect home, you need the perfect mortgage loan to pay for it. You probably have an idea of what you want already: the lowest interest rate and smallest monthly payment possible. Yet these days, there are so many options to consider when shopping for loans. Every loan offer will have its own "terms", "points", "fees", "rate(s)". Are you considering a fixed payment loan, or possibly an adjustable payment loan? If adjustable, are you interested in a 3/1, 5/1, or something else entirely? And how do you know what that teaser rate is really worth?

This calculator will help you compare the total cost of any two or three mortgages. This analysis includes the effect of a tax deduction for interest. If the interest is not deductible, or if you do not want to show the effect of the tax deduction, choose an income tax rate of zero.


Look in the chart for a play by play of of your tax savings...

Be sure to check the "Tax Savings vs Term chart" checkbox. You'll see multiple loan lines on the chart. Each line tracks the tax savings over the term for that loan. If you provide names for your loans in the input area, then the chart will reflect these names.


Notice the financial details section...

This is where you will find the APR of various loans entered. The annual percentage rate (APR) is the standardized (and regulated) way to express your loan rate. The APR takes one-time fees (like origination fees and points) and rolls them up into the loan expressing the result as an overall rate. This really helps when comparison shopping for loans.

Another aid in the comparison is the "Present value of the loan". This tells you how much all the payments are worth in today's dollars. That way inflation doesn't get in the way of comparing loans. Weigh all this information and be sure to read your loan documents.

It's tough to find one loan that fits everyones objectives. But this tool makes it easier to find the right loan for you.


Tips for the astute...

Your tax rate is used to calculate the monthly advantage of your interest deduction. If you wish not to include the interest deduction advantage, you may set your tax rate to 0. Please keep in mind that your tax deduction may be limited beyond the scope of this calculator. Talk to your tax advisor before using these results in your specific situation.

Your investment rate of return is used to compare the difference between investing in a house and investing elsewhere (e.g., like your savings account). This helps us keep the comparison of a wide array of loans fair using the "Present value of the loan".


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