The Comparisons table on page 3 of your Loan Estimate gives you four standardized numbers for sizing up a mortgage offer: the total you will have paid in five years, how much principal you will have paid off in that time, the annual percentage rate, and the total interest percentage over the life of the loan. Every lender has to present these figures the same way under federal rules, so you can put two Loan Estimates next to each other and compare them directly without decoding different formats.1Consumer Financial Protection Bureau. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate)
The Five-Year Total
The first figure is the total dollar amount you will have paid through the end of the 60th monthly payment. It combines four things: principal, interest, mortgage insurance, and the loan costs shown on page 2 of your Loan Estimate.1Consumer Financial Protection Bureau. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) The calculation assumes every payment is made on time and exactly as scheduled.
This is the number that captures how much cash actually leaves your pocket during the first five years, including closing costs paid up front. If one lender charges $8,000 in loan costs but offers a lower rate, and another charges $3,000 with a higher rate, the five-year total shows which deal is cheaper across that window. Most borrowers sell or refinance well before 30 years, which is why the five-year snapshot is often more relevant than the full-term figures.
What It Leaves Out
The five-year total does not include property taxes or homeowner’s insurance, even when those costs are collected through your monthly escrow payment.2Consumer Financial Protection Bureau. Guide to the Loan Estimate and Closing Disclosure Forms Those amounts show up separately in the Projected Payments section on page 1 and in the escrow breakdown, but they are excluded from the Comparisons table. The logic is that taxes and insurance do not change based on which lender you pick, so including them would muddy the comparison between loan offers. Your actual monthly outlay will be higher than the table implies once escrow is factored in.
Mortgage Insurance
If your down payment is less than 20%, you will likely pay private mortgage insurance, and those premiums are built into the five-year total. The calculation uses whatever mortgage insurance is scheduled over the 60 months based on the loan’s original terms.1Consumer Financial Protection Bureau. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) PMI can sometimes be canceled before the five-year mark once your equity reaches 80% of the home’s original value, which would reduce your real costs, but the Loan Estimate does not predict early cancellation. It shows the scheduled amount, which keeps the comparison conservative and consistent across lenders.
Principal You Will Have Paid Off
Right below the five-year total is a second dollar figure: the amount of principal you will have paid down by month 60.3eCFR. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) This strips out interest, insurance, and closing costs to isolate how much your original loan balance actually shrinks. It is a direct measure of equity growth from your mortgage payments alone.
This figure tends to be sobering. Early payments are heavily weighted toward interest, so the principal paid off after five years is often a small fraction of what you have spent. Seeing the two numbers side by side makes the picture clear: if your five-year total is $120,000 and only $25,000 went to principal, the remainder covered interest, insurance, and fees. When comparing two offers, the one that shows a higher principal payoff at the five-year mark is building your equity faster, which matters if you plan to sell or refinance in that window.
A lower interest rate does more than save on interest; it shifts more of every payment toward the balance. That shift compounds, because as the balance drops, less interest accrues the following month. The principal payoff figure captures the effect in a single number you can compare across lenders.
Annual Percentage Rate
The APR is the number most borrowers have heard of and often misunderstand. It is not the same as your interest rate. The interest rate determines the monthly interest charged on your balance. The APR takes that rate, folds in certain upfront costs like origination fees and discount points, spreads them across the full loan term, and re-expresses the result as a yearly percentage.3eCFR. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate)
The APR’s real use is exposing fee differences between lenders. One lender might advertise 6.0% but charge $6,000 in origination fees, pushing the APR to 6.35%. Another might quote 6.25% with minimal fees and an APR of 6.30%. The second loan has the higher stated rate but costs less once fees are counted. Without the APR, you would need a spreadsheet to see that.
It has one limitation worth knowing. Because it spreads upfront costs over the entire loan term, it assumes you keep the loan through the final payment. If you refinance or sell after seven years, those front-loaded fees hit your effective cost harder than the APR suggests. For shorter holding periods, the five-year total is arguably the better comparison tool. Use both together.
How Close the APR Has to Be
Federal rules set a tolerance for how far the disclosed APR can drift from the actual number. On a standard mortgage, the disclosed APR is considered accurate if it falls within one-eighth of one percentage point of the actual rate. For irregular transactions with features like multiple advances or uneven payments, the tolerance is one-quarter of one percentage point.4Consumer Financial Protection Bureau. 12 CFR 1026.22 – Determination of Annual Percentage Rate If the APR on your Closing Disclosure moves outside that tolerance, the lender must give you a corrected disclosure and at least three business days to review it before closing.5Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs
Total Interest Percentage
The TIP is the simplest number in the table and often the most eye-opening. It shows the total interest you will pay over the entire loan term, expressed as a percentage of your loan amount.3eCFR. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) A TIP of 80% on a $300,000 loan means $240,000 in interest alone if you hold the mortgage to its final payment. That kind of number gets attention in a way monthly payments do not.
The TIP is where loan term length shows itself most clearly. A 30-year mortgage at a given rate can easily carry a TIP double or more what a 15-year loan shows, even at similar rates. Fifteen-year loans usually carry lower rates to begin with, and the shorter repayment period gives interest far less time to accumulate. On a $320,000 loan, the difference in total interest between a 15-year and 30-year term can exceed $150,000. The TIP puts that contrast into one comparable percentage.
Like the APR, the TIP assumes you keep the loan for the full scheduled term and never make extra principal payments.1Consumer Financial Protection Bureau. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) Even modest additional payments each year would lower your actual interest cost. The TIP shows you the ceiling, which is useful as a worst-case benchmark when you are choosing between offers or weighing a shorter term.
If You Are Looking at an Adjustable Rate
Every figure in the Comparisons table comes with a caveat when the loan is an ARM. The interest rate disclosed on the Loan Estimate is the fully-indexed rate, combining the loan’s index value and margin as of the time the estimate is prepared.1Consumer Financial Protection Bureau. 12 CFR 1026.37 – Content of Disclosures for Certain Mortgage Transactions (Loan Estimate) The projected payments use the maximum principal and interest amounts the loan terms allow, and that feeds into the five-year total.
The practical result is that the Comparisons figures for an ARM may not reflect what you actually pay if rates move. If rates fall or stay flat, your costs may end up below the estimate. If they climb to the loan’s cap, the estimate may prove accurate or optimistic. The five-year total is especially sensitive here because many ARMs have an initial fixed period of five or seven years. Comparing an ARM’s five-year total to a fixed-rate loan’s is still useful, but keep in mind the ARM figure rests on assumptions that may not hold.
Using the Four Numbers Together
The table works best when you gather Loan Estimates from at least three lenders for the same type of loan, requested close together in time so rate differences reflect the lender rather than the market. Scan the five-year total first. That single number captures the combined effect of rate, fees, and mortgage insurance and is the fastest way to rank your options.
Then check the principal payoff. Two loans with similar five-year totals can differ meaningfully in how much equity you build, and the one that pays down more principal leaves you in a stronger position if you sell, refinance, or borrow against your equity later. The APR is most useful when one lender charges noticeably higher fees than another but advertises a lower rate. The TIP matters most when you are deciding between a 15-year and 30-year term or weighing whether a larger down payment is worth it to shrink the loan.
Keep in mind what the table does not capture. It says nothing about rate-lock terms, prepayment penalties, or how responsive a lender will be when something goes wrong. The Comparisons table is a strong starting point for narrowing your options, and it is one piece of a larger decision.