Which loan is better?

This calculator calculates which of two mortgage loans is the better deal. Either or both of the loans may be fixed- or adjustable-rate (ARMs) loans.

Amounts are shown for principal and interest (P+I) and combined payments. Combined payments include insurance, taxes, and private mortgage insurance where applicable. The calculator also calculates the effective interest rate for the two loans.

The interest rate on an adjustable-rate mortgage loan is usually reset on the loan's anniversary date. To calculate the new rate, a spread, or margin, is added to a widely used index rate.

Two widely used index rates are the yield on 1-year constant maturity U.S. Treasury bills (CMT) and the 11th District Cost of Funds Index (COFI), published by the Federal Home Loan Bank of San Francisco.

Your monthly payment increases or decreases with a change in the loan interest rate. Because loan payments change periodically, adjustable-rate mortgages are not for every homeowner.

Adjustable-rate mortgage loans usually have a periodic and lifetime cap that limit how much the interest rate can change in one period and the maximum interest rate during the lifetime of the loan, respectively.



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