- Monthly payment
- The fixed principal-and-interest amount due each month that repays the loan by the end of its term. The calculator shows it for both options and flags the lower one. A lower payment is not the same as a cheaper loan: a longer term can lower the payment while greatly increasing total interest.
- Total interest
- The sum of all interest paid over the life of each option if every payment is made on schedule. It is the clearest measure of the cost of borrowing between two offers with different rates and terms. For example, $300,000 at 6.25% over 30 years costs about $365,000 in interest; at 5.75% over 15 years, about $148,000.
- Interest rate
- The annual percentage the lender charges on the outstanding balance, before fees. Shorter terms often carry lower rates, which compounds their interest advantage. Comparing rates alone can mislead if one offer has higher fees or discount points, which is why the APR is also worth checking.
- Loan term
- The number of years over which the loan is scheduled to be repaid in full. A longer term spreads principal over more payments, which lowers each payment but increases total interest, because the balance stays outstanding longer. A shorter term does the reverse: higher payments, less interest overall.
- Annual percentage rate (APR)
- The yearly cost of borrowing including interest and certain lender fees and points, expressed as one rate. Lenders must disclose it, so it helps compare offers with different fee structures. This calculator compares the interest rates you enter; the APRs on the offers may rank them differently.
- Closing costs
- Fees and charges paid to finalize a loan, such as origination, appraisal, title and recording. They are not included in this comparison, which uses payment and interest only. An offer with a lower rate but higher closing costs may only come out ahead if you keep the loan long enough.
- Discount points
- Up-front fees paid to the lender to lower the interest rate; one point equals 1% of the loan amount. A lower-rate option may reflect points you would pay at closing. Paying points makes sense only if the monthly saving recovers their cost before you sell or refinance.
- Break-even point
- The time it takes for a lower payment or rate to repay the extra up-front cost of getting it, such as points or higher closing costs: extra cost divided by monthly saving. $3,000 of extra costs recovered at $100 a month breaks even in 30 months. Keeping the loan past that point is where the cheaper option actually pays off.
