The above works best with Chrome and Safari, somewhat ok with Firefox, and may not even show up in IE depending on the version.

How to Compare Mortgage Plans

It may be a daunting task to choose a mortgage plan from a vast number of options:

What is the best way to compare them?

Rule of thumb: compare them at the same basis. Then the question is, how to choose a base that is fair.

Let’s say, besides buying a house, you also do some investment with your extra money at some expected return, for example, 4% annually. Then any money not used to pay off the principle, e.g., the monthly interest on your mortgage, could hypothetically be put to your investment otherwise. Then it’s simple to come up with an easy way to compare two mortgage plans:

For example, let’s compare 15 year 2.75% with 30 year 3.25% at no point and no cost, with a loan amount of $300,000. The monthly payment for 15yr is $2035, for 30yr is $1305. The difference is 2035 - 1305 = $730. It means:

After some math work, you’d conclude that if your other investment return is on average 3% annually, then 15yr plan is better than 30yr; if you can instead make a steady return of 5%, then 30yr is better.

At the top is a little tool to help you with the math. Just fill in the loan amount, the expected return of your other investment, and details of two plans. It’ll plot a graph with expected return for each plan. Note that:

Lastly, remember that there are other factors in choosing a mortgage, e.g, you want to sell it instead of keeping it for long, or whether you can even make timely monthly payment. So, don’t conclude solely based on what I say here, choose wisely!

This program is made with Fay, Haskell compiled to Javascript, in case you may wonder.