Ravi Chandran
Borrowing calculator is a handy tool to help you ensure you don’t over leverage when buying a property
If you were thinking of buying a home, whether it is your first or fifth time, a borrowing calculator is one of the most important tools you need to have at hand. A mortgage payment calculator will not only help you to calculate the mortgage loan amounts, but also the interest rates offered by each lender according to the length of the loan term.
As such, any mortgage broker who does not have a mortgage calculator as the primary tool in his ‘toolbox’ to help buyers is a useless one. Besides being an asset to your mortgage broker, since it will allow your broker to provide you with the most accurate information, a mortgage calculator has other significant benefits that will directly impact you, the property buyer.
A good mortgage calculator would help you to compute how much and how frequently your repayments will be on monthly, annually and throughout the full duration of your loan period. It can also help compute changes in rates and payments in case your fixed rate changes during your mortgage period.
A borrowing calculator will allow you to always keep an eye on your money from the very start of the home buying process.
A mortgage payment calculator will equip you to walk into a mortgage with accurate information, affording you peace of mind as you will know exactly how much you can afford to spend each month. This will also help you to better budget other household bills, such as groceries, credit card expenses, taxes and the like.
A mortgage calculator’s ability to compare lenders rates is another added advantage as it means that you always have a price comparison tool at hand, where you can quickly compare various mortgage products at the touch of your fingertips, from the comfort of your home. This will enable you to easily calculate which lender best suits your needs and quickly compute how much you can save monthly and annually between various loan products.
The difference between various loan products may seem minute when you only see the percentage difference but a mortgage payment calculator will help you clearly see how even a 0.15 per cent difference between loan products can save you thousands of dollars.
Take for example a mortgage of $500,000 from one lender over a period of 25 years, with an interest rate of 2 per cent. This will amount to a $2,119.27 repayment each month. In just a few easy steps, a mortgage calculator can help you find another, more affordable product, such as a mortgage with the same terms with a slightly lower interest rate of 1.85 per cent. This would constitute a monthly repayment of $2,082.95.
Although a saving of $36.32 per month may seem small to some, this saving translates to a sizable $435.84 per year and a savings of $10,896 throughout the entire 25-year mortgage period. A few simple clicks on the mortgage calculator has now enabled the buyer to save thousands of their precious money – money that could go towards major life expenses or even a well-deserved vacation!
Besides this, some mortgage calculators can help increased insight as they could provide you, the property buyer, with the ability to calculate the differences between principle and interest only mortgages and repayment numbers. With the help of such features, you can rest easier, only bearing in mind that there will be a final balance to pay at the end of your term if you opt for principle and interest only payments.
What the borrowing calculator lacks is the human touch. The loan calculator will not be able to tell you which will be the best home loan for you. It will not be able to tell you when you need to refinance your mortgage, the terms of change when you refinance, or if you choose to switch lenders midway as your loan term progresses.
This is where a mortgage broker will be vital in helping you navigate changes to your loan and mortgage. A mortgage broker will take the information the mortgage calculator has provided you to offer multiple mortgage options that are uniquely suited to you and your needs. A good mortgage broker will also take time out to explain what each of these options mean for you.
It can be overwhelming for a layperson to try to make sense of the housing market, given that it is chock full of technical terms and jargon. Even with the help of a mortgage calculator most home buyers will not only know the industry and the products within the industry well. A mortgage broker however will be able to explain these nuances to you in an accurate way that is easy to understand.
Since the beginning of this year, banks have raised interest rates for both fixed and floating home loan packages by 10 – 30 basis points (bps). Some banks have already upped their mortgage rate to 2.05 per cent, to keep pace with the increasing interest rates.
There are good reasons why homeowners are unsure and unfamiliar on how to get the best home loans. The simplest one being most don’t buy homes as often as they buy other necessities (like food and clothes). But actually, there is no reason why you should contribute to the banks’ profits when with a simple tool like the mortgage calculator, you can keep the difference in interest rates.
After reading this article, if you are persuaded into trying out a loan calculator, you can try the range of useful ones which are available online.
