1st Loan 5yr Cost

How It Is Calculated

The 1st Loan 5 yr Cost is calculated by taking the monthly payment, which includes principal, interest and possibly property taxes, homeowner's insurance and mortgage insurance, and multiplying the total/sum by 60 months. The cost to acquire the loan (closing costs) are then added to that calculation to determine the 1st Loan 5 yr Cost.

Example:

1st year 5 yr Cost = (Monthly payment) x 60 + Closing Costs

$188,336.20 = ($3,025.77 (PITI + MI) x 60) + $6790.00

Note: The calculation varies from the CFPB's definition of 1st yr Loan Cost used on page 3 of a Loan Estimate (LE), which includes principal, interest, mortgage insurance (if applicable) and loan costs, excluding taxes and homeowner's insurance. 

Why Use It

Including the 5-year cost allows the borrower to make a comparison between the costs of the different loan options presented in this common time horizon to own a home, allowing the borrower to determine which option is the most cost effective for their goals. It was added to the Total Cost Analysis (TCA) at the same time TRID made changes to the mortgage industry's legal disclosure such as Loan Estimates (LEs) and Closing Disclosures (CDs).