Inputs
Example data table
| Home value | Down | Loan | Tax/yr | Ins/yr | PMI% | Extra/mo | A | B |
|---|---|---|---|---|---|---|---|---|
| $350,000 | $70,000 | $280,000 | $4,200 | $1,200 | 0.60% | $0 | 30 yrs @ 6.25% | 15 yrs @ 5.75% |
| $500,000 | $100,000 | $400,000 | $6,000 | $1,800 | 0.50% | $150 | 30 yrs @ 6.50% | 20 yrs @ 6.10% |
Formula used
- Monthly interest rate: r = (APR / 100) / 12
- Number of payments: n = years × 12
- Monthly payment (principal + interest): M = P × r × (1+r)^n / ((1+r)^n − 1) (or M = P / n when r = 0)
- Amortization each month: interest = balance × r, principal = M − interest, then subtract principal plus any extra payment.
- Escrow estimate: property tax and insurance are converted to monthly amounts and added to show a fuller cash-flow view.
- PMI estimate: charged monthly until balance falls to ≤80% of the provided home value.
How to use this calculator
- Enter home value, down payment, and loan amount (or leave loan blank).
- Set annual property tax and annual insurance to estimate escrow.
- Enter an optional PMI rate and extra monthly payment.
- Fill Option A and Option B with different terms and interest rates.
- Press Compare Terms to see monthly cost and total cost differences.
- Use Download CSV or Download PDF for a shareable report.
Why term length changes outcomes
A longer term lowers the required payment because the same principal is spread across more months. The tradeoff is that interest accrues for longer, which typically raises lifetime interest even when the rate is slightly lower. This calculator quantifies that tradeoff using your loan amount, rates, and term years for two options. With identical principal, the payment count differs sharply: a 30-year term has 360 scheduled payments, while 15 years has 180. Fewer payments can raise the monthly obligation, but it shortens exposure to interest rate compounding and accelerates principal reduction over time.
Payment components you should compare
The base payment covers principal and interest, but many budgets feel the full monthly total. Property tax and homeowners insurance are converted to monthly estimates, and PMI can apply until the balance drops to eighty percent of the stated home value. Comparing both the base payment and the total cash flow prevents surprises.
Payoff speed and extra payments
Even small extra payments reduce balance faster because they go directly to principal after interest is calculated. That shortens months-to-payoff and reduces interest. Use the same extra payment for both options to see whether a shorter term still offers enough savings once cash flow is considered.
Reading the amortization preview and chart
The first-year tables show how early payments are interest heavy and gradually shift toward principal. The Plotly balance chart visualizes remaining loan balance over time for both options. Where the lines separate, the faster declining line indicates quicker equity build and earlier payoff. A flatter line usually signals greater total interest.
Choosing the more efficient option
For most borrowers, the best option balances affordability and total cost. If Option B costs more each month but saves substantial interest and finishes sooner, it may be efficient when income is stable. If Option A preserves monthly flexibility, consider pairing it with an extra payment strategy to capture some savings while keeping a lower required payment.
FAQs
Does this include closing costs and lender fees?
No. It models principal, interest, property tax, insurance, and estimated PMI. Add closing costs separately when comparing offers, because fees can outweigh small rate differences, especially if you refinance or move within a few years.
Why do my PMI totals look different from my lender estimate?
PMI pricing varies by credit, loan type, and insurer. This tool uses a simple annual rate and stops PMI when balance falls to 80% of home value. Your lender may use different cancellation rules or updated valuations.
What does “monthly total (excl. PMI)” mean?
It is the base principal-and-interest payment plus estimated monthly tax and insurance. PMI is shown separately because it may end early. Use this total for budgeting, then review PMI amounts to understand early-year cash flow.
How does the extra payment affect both options?
Extra payments are applied to principal after interest is calculated each month. That reduces future interest and can shorten payoff time. Keeping the extra payment the same for both options helps you compare term efficiency under identical acceleration.
Why can a shorter term have a higher payment but lower total cost?
Shorter terms spread principal over fewer months, so the payment rises. However, interest accrues for fewer periods and the balance falls faster, which typically reduces total interest. The result can be a lower lifetime cost even at similar rates.
Which option should I choose if I might sell soon?
Focus on cash flow and break-even. A lower payment can reduce risk if your timeline is short. Compare total cost over your expected holding period by checking early-year interest and the balance curve, then weigh any fees from the loan offer.
These answers are educational and may not match your lender terms.