loan comparison program

compute lowest cost loan
DecisionAide Analytics Loan Comparison Program

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Multiple Loan Comparisons
Loan Comparison Calculator

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Frequently Asked Questions


There are currently 53 programs available on this site:
    Forty eight of them can be accessed by clicking on the 48 Mortgage Calculators on the Home Page. A menu describing what they do will appear.
    The other programs allow you to print out complex loan amortization schedules, compare up to 5 loans in order to determine which loan would cost you the least amount of money over a choice of holding periods, compute long-term care breakeven period, and provide two complex savings calculators. These programs are also accessed from the Home Page. What follows is a description of the Multi-Loan Comparison Program.

Multi-Loan Comparison Program:
A Tool for Choosing the Lowest Cost Loan

What the analysis tells you:

For new loans: Each analysis tells you which of five loans will be the lowest cost to you over a variety of time frames at a specified discount rate. All analyses cover up to a 30-year period.

For refinanced loans: The analysis reveals whether or not it will be profitable to refinance and how long it will take before you recover the additional costs of refinancing.

How the program works:

The analysis takes all costs and benefits of each loan, determines what the amounts are, when they will occur, and discounts these costs and benefits back to their value today using each of up to three discount rates specified by the user. It does this for each of up to five loans at each of three user specified discount rates for every year that each of the loans continues to require payments.

Which numbers are being processed?

All costs and benefits are being processed. The costs include (1) all deductible and non-deductible closing costs, (2) tax deductible "points", (3) all payments on the loan, and (4) Mortgage insurance, if applicable. The benefits include (a) the build up of equity achieved by paying down the loan balance and (b) any difference in loan size if you are comparing loan sizes of differing amounts. This last point is especially crucial if an "apples to apples" comparison is to be made. Closing costs included ("rolled up") in the loan amount are also taken into consideration.

Why is it necessary to process all of these numbers?

When large amounts of numbers are involved in analyzing alternative courses of action, these numbers must be processed down to a single number that can then be easily compared to another single number. In order to make the single numbers comparable (i.e. apples to apples), all of the numbers must be processed in an identical fashion to arrive at a "measure of return". Examples of measures of return include Present Value, Net Present Value, Internal Rate of Return, Cap Rate, and ROI, among others.

A measure of return yields a single number that is the "financial equivalent" of all the numbers being analyzed.

This analysis uses "present value" as the single number "financial equivalent" of all the costs and benefits of each loan analyzed. The rate at which all future cash flows are brought back to "present value" is called the discount rate. The discount rate is the interest rate at which you can invest your money until such time as it is needed to make a payment on the loan. Up to three discount rates can be specified. The discount rate(s) is/are user specified in this analysis. An analysis is done for each rate.

Caveat: The after tax analysis is accurate only to the extent that all of your interest deductions are allowable on your tax return. If all interest deductions are not allowable, the actual after tax results will fall somewhere between the before tax analysis and the after tax analysis supplied. Loan interest deductions depend on the size of the loan and the taxpayer’s Adjusted Gross Income for full deductibility. See your tax professional for detailed advice.

What you get:

You receive 30 different analyses. 5 loans x 3 discount rates x two tax postures (before tax & after tax) in six separate reports - one for each discount rate on a before-tax basis and one for each discount rate on an after-tax basis.

 

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