Compare Loans Side-by-Side: Beyond the Interest Rate

Comparing Loans: Beyond the Rate

Comparing loans is more than just comparing interest rates. A 6.0% loan with $5K in origination fees can cost more than a 6.5% loan with no fees over a short holding period. The TRUE cost comparison requires: total interest paid, total fees, monthly payment, and opportunity cost of higher payments. A 15-year mortgage saves $268K over a 30-year on $350K — but the $724/mo higher payment could have earned $400K invested at 8%. Always compare APR (includes fees) not just the rate.

How to Compare Loan Offers

Gather all offers with APR, interest rate, term, fees. Compare total cost over life, monthly payment, and break-even if you plan to refinance or sell. Use this calculator to run side-by-side scenarios.

APR vs Interest Rate

APR includes fees; interest rate does not. A 6.0% rate with 1 point might have 6.2% APR. Always compare APRs when evaluating different loan offers.

Loan Term Comparison

Shorter terms = higher monthly payments but lower total interest. A 15-year mortgage saves $268K over a 30-year on $350K — but requires $724/mo more. Choose based on budget and goals.

Total Cost of Loan

Total cost = Principal + Total Interest + Origination Fees. A $350K loan at 6.25% for 30 years costs ~$680K over life. Run both scenarios to see the trade-off.

Loan Origination Fees

Origination fees add to true cost. A 6.0% loan with $5K origination can cost more than a 6.5% loan with no fees over a short holding period. Fees are amortized over the loan term.

Fixed vs Variable Rate

Fixed rates are predictable; variable rates can start lower but rise. For refi: $300K remaining at 7.5% 25yr left vs refi 6.0% 30yr + $8K closing — refi saves $289/mo, breaks even in 28 months.

Refinance Break-Even

Break-even = Closing costs / Monthly savings. If you save $289/mo and pay $8K closing, break-even is 28 months. Stay longer than that and refi wins.

Fee Trap Example

Loan A: 6.0% + $5K origination. Loan B: 6.5% no fees. A looks cheaper on rate but B may win over a short holding period. Run the numbers for your scenario.

📝 Worked Example

$350K mortgage: 30yr at 6.25% vs 15yr at 5.9%. 30yr payment: ~$2,155/mo, total interest ~$426K. 15yr payment: ~$2,879/mo, total interest ~$158K. Savings: $268K in interest. Trade-off: $724/mo higher payment for 15yr. If you invest that $724 at 8% for 15 years, you'd have ~$300K — so the 30yr + invest strategy can work if you're disciplined.

💡 Did You Know?