There is always a lot of debate around what type of mortgage is most advantageous for buyers. A mortgage comparison calculator can help you see, side-by-side, the cost of your home loan options.
To help clear up any confusion and provide you with the insight you need to make the best mortgage decision, we've also answered the most common questions about mortgage comparisons below.
Mortgage comparison calculators are handy tools that take the guesswork out of all of your mortgage questions. We offer one free of charge that you can access right here.
With our comparison calculator, you can enter your mortgage amount, your closings costs and what your interest rate would be for each of your loan offers.
Armed with that information, our mortgage comparison calculator can give you an accurate depiction of how much your home loan costs, how affordable your payments are, and how much is going to interest.
A mortgage term is the projected duration in which a borrower will be paying down their mortgage. A mortgage's monthly payments are calculated in large part by the term of a mortgage.
For example, say you owe $150,000 on your mortgage. If your term is 15 years (or 180 months), looking solely at principal, your amount due each month would be 150,000 divided by 180 months or $833.33 per month. You would then add to that amount any applicable interest levied by your financial institution.
Alternatively, if the term of your loan was 30 years, you would divide your $150,000 loan by 360 for a total of $416.00 per month plus applicable interest.
As you can see, mortgage terms can have a profound effect on how much you'll be liable pay to your lender on a monthly basis and are an important part of conducting a mortgage comparison.
Interest rates are fees imposed by lenders for loaning you the money you need to purchase a home. The larger your interest rate is, the more you'll end up paying over the life of your loan in addition to your principal borrowed amount.
To better understand interest, consider this brief example:
If you made a $100.00 purchase on borrowed money and your lender said that they will collect a 10% interest rate on your borrowed funds. Not only would you need to pay back the $100.00, you would also have to pay back an additional $10.00 (10%).
The same goes for homes. If you borrow $100,000 to purchase a home at a 4% interest rate, you'll make monthly payments on your principal due plus the 4% interest that is attached to your loan balance.
The longer your loan term, the longer you'll pay interest on your balance due, and the more expensive your house will be.
The answer tends to be yes. If you can afford it of course.
A 15-year loan will be cheaper than a 30-year loan on the same property but your monthly payments will be much higher given that you only have half the time to pay down your balance.
To understand exactly how much your payments would be in both instances, it's a good idea to conduct a comparison of your own using our Mortgage Comparison Calculator.
This is something that's decided by your lender but almost certainly the interest rate will be higher on a 30-year mortgage than on a 15-year mortgage.
This is because the length of a 30-year mortgage represents more risk to lenders in comparison to a 15-year mortgage. More risk means they need to charge you more to mitigate their potential losses.
Typically, we would caution you in regard to closing costs and your APR. Closing costs and fees are often unexpected expenses a home buyer will incur in addition to their down payment.
Some examples include origination fees, mortgage points, and property taxes. These costs can be thousands of dollars.
Many times closing costs can be negotiated with a home purchase so work with your broker to see how you can avoid overpaying.
As you can see from the Q and A above, there are important differences in mortgage terms you should be aware of prior to purchasing your home. A $200,000 30 year mortgage can cost a home buyer over $100,000 more in interest than a 15-year loan.
That reality should paint a picture for you in regard to the importance of doing a mortgage comparison and utilizing a comparison calculator to make sure you fully appreciate the gravity of what you're taking on.
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