Loan comparison calculators allow borrowers to easily compare terms, home values, interest rates and more.

Even slight differences in terms and interest rates can make a big impact on how much you’ll pay over the life of the loan. 

Loan comparison calculators take the guesswork out of your decision-making and allow you to take control of your loan options.

Let’s take a look at how to use Compass Mortgage’s loan comparison calculator to discover the best, most affordable loan options for you.

Why should I compare loans?

Loan comparison is an essential part of the homebuying process. Mortgage lenders offer various terms and interest rates, both of which affect how much you’ll pay over the life of the loan.

It’s helpful to calculate different scenarios to help you decide whether you should choose a different term length or down payment amount.

The No. 1 step in the homebuying process should be loan pre-approval. You can get pre-approved with a few different lenders or a few different loan options, then use a comparison calculator to find the best deal.

Let’s take a look at the factors borrowers must consider when comparing loans.

Loan terms

Your loan term—or loan length—is one of the biggest factors affecting how much you’ll pay every month.

The loan length determines how long you’ll be repaying your mortgage and how much you’ll pay per month. 

It also affects your mortgage rate: A shorter term usually has a lower interest rate.

For example, at the time this article was written, 30-year fixed mortgage rates averaged 5.18%, while 15-year rates averaged 4.54%.

Mortgage lenders commonly offer 15-year and 30-year fixed-rate terms, and some lenders offer 20-year fixed rates too.

Interest rate

Each lender will offer a slightly different mortgage—or interest—rate.

They may have different overhead costs that affect this rate, but they also have to consider the borrower’s personal financial situation.

Your income, debt, credit and down payment all affect your mortgage interest rate. Generally, the better your financial situation, the better your mortgage rate.

However, if you’re unhappy with a rate from a certain lender, it’s helpful to compare it with another lender. Some lenders allow lower credit scores or higher debt-to-income (DTI) ratios.

Getting pre-approved for a loan will show how the lender’s qualifications affect your rate.

Home value or loan amount

To apply for a mortgage with a lender, you’ll need to have an idea of the home’s value. If you haven’t found your home yet and are seeking pre-approval, estimate this amount.

You can use this estimate to calculate your loan amount. Calculating your loan amount helps you understand how much you’ll be paying over the life of the loan for each term option.

If the payments end up being more or less than you had imagined, you can adjust your home price range accordingly.

Down payment

How much are you able to put down on your new home?

Financial experts still recommend buyers put down at least 20%, which eliminates the need to pay private mortgage insurance (PMI). However, most lenders allow down payments as low as 3% for conventional loans.

Even if you can’t afford a 20% down payment, putting down as much as possible helps you save money over the length of the loan. 

You can play with different percentages in a loan comparison calculator to help you understand all your options.

How do I compare loans?

The simplest way to compare loans is with a loan comparison calculator.

Compass Mortgage offers a loan comparison calculator for future buyers to review different loan scenarios.

You’ll plug in your loan term, home value, down payment amount, loan amount and interest rate for two loan options.

Once you hit the “calculate” button, you’ll instantly receive your results for each loan option. Results include your monthly payment amount, which will be further broken down into your principal, interest, taxes, insurance and PMI.

If you plugged in a down payment of at least 20%, your PMI will be zero.

How do I know which loan is best for me?

The right loan option for you is the one that best fits into your current and future goals.

While there may not be much you can do immediately about your mortgage rate, you have control over the price of the home you purchase, the down payment amount and the loan terms.

Let’s compare the two most common loan terms to help you determine the pros and cons of each.

15-year fixed-rate loan

If you choose a 15-year fixed-rate mortgage loan, you can pay off your loan faster, which means you will pay less interest over the life of the loan.

You also will build equity much faster and qualify for a lower interest rate with your lender.

The downside of a 15-year loan is the higher monthly payments; but if it fits into your budget, you will own your home more quickly.

30-year fixed-rate loan

A 30-year fixed-rate loan makes homeownership affordable for many people because of the lower monthly payments.

The downside is that you will have a higher interest rate, and building equity in your home will take longer.

The good news is that no matter which loan you choose, you always have the option to refinance down the road if you want to change your loan terms or interest rate.

If you’re unsure which loan option is better for you, you should consult with your trusted loan officer. They are there to answer any questions you may have about your loan options and offer support as you determine which option makes more sense.

What are my next steps?

Try out the Compass Mortgage loan comparison calculator to help you weigh your loan options and discover which terms, home prices and down payment amounts are best for your unique loan scenario.

If you haven’t applied for pre-approval with a loan officer yet, start now with the trusted lending experts at Compass Mortgage.

Our Get Committed® program takes you farther than pre-approval by providing a fully underwritten loan commitment, locking in your interest rate before you even find the property you want to buy so that you don’t miss out on the home that’s right for you.

With the Get Committed, we can close on your loan in as little as 15 days, making your offer much more appealing to sellers than standard pre-approval.

At Compass Mortgage, we are defined by our integrity and willingness to go above and beyond for our customers. We can’t wait to be your lending partner and advocate through every step of the process.

Photo by RODNAE Productions