Compare Loan Estimates: Which Offer Really Costs Less?
Enter the numbers from two Loan Estimates to see which offer really costs less, and when. Not sure where to find them? See how to read a Loan Estimate. Results update as you type.
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“Interest and costs” is what you pay beyond paying back the loan: your payments plus loan costs, minus lender credits, minus the principal you have paid off. A lower number is better. This compares the offers on the same loan. It leaves out property taxes and homeowners insurance, which are usually the same for both, and it assumes mortgage insurance, if any, lasts the whole time you compare.
How this Loan Estimate comparison works
A lower interest rate does not always mean a cheaper loan. Lenders often trade rate for cost: paying more upfront, such as discount points, lowers the rate, and accepting a higher rate can earn a lender credit. This tool adds up what each offer costs over the number of years you expect to keep the loan, so you can compare them fairly.
For each offer it adds your monthly payments and your loan costs, subtracts any lender credits, and then subtracts the principal you have paid off by then, since that is money you still have as equity. What is left is the interest and costs you paid, which is the same idea as the “In 5 Years” comparison on page 3 of a Loan Estimate. The break-even point is how long you need to keep the loan before the offer with higher upfront costs and a lower rate comes out ahead.
The results assume a fixed-rate loan with the same amount and term in both offers. Real costs can differ, and some fees can change before closing, so use this as a guide and confirm the numbers with each lender. See the guide on reading a Loan Estimate for where to find each number.
Common questions about comparing Loan Estimates
How do I compare two Loan Estimates?
Make sure both are for the same loan type, amount, and term. Then compare the interest rate on page 1, the Total Loan Costs in Section D on page 2, and any lender credits in Section J. This tool turns those numbers into one cost over the time you expect to keep the loan.
Is the lowest interest rate always the cheapest loan?
No. A lower rate can come with higher loan costs, and a higher rate can come with lender credits. Which offer costs less depends on how long you keep the loan, so the tool shows how the answer changes over time. Points, which are fees paid for a lower rate, are one reason; see what discount points are.
What does “interest and costs” mean?
It is what you pay beyond paying back the loan: your payments plus loan costs, minus lender credits, minus the principal you have paid off. A lower number is better.
Where do I find these numbers on a Loan Estimate?
The interest rate and monthly mortgage insurance are on page 1, and the total loan costs and lender credits are on page 2. See how to read a Loan Estimate for a page-by-page walkthrough.
Why should I get Loan Estimates from more than one lender?
Rates and fees differ between lenders, even for the same borrower on the same day. Getting two or three lets you see the real difference. Keep your credit checks close together, as explained in should I let a lender check my credit.