A home loan calculator is an online tool that will give you an overview of your mortgage. It will help you estimate your repayments and how they will change when the interest rate fluctuates. It will also show the effect of extra repayments on your home loan, and what happens when you add an offset account or lump sum to your home loan.
Taking out a home loan is an important step in the home buying process. You need to consider various factors that will affect the overall cost of your mortgage. Factors such as the interest rate, loan amount, term of the loan, repayment schedule, and the repayment type.
So whether you’re purchasing a house, investing in a property, or refinancing your home loan, an online mortgage calculator will come in handy. Let’s take a look at the reasons why you should use a home loan calculator.
How to use a home loan calculator
Using a home loan calculator is pretty easy. You just need to enter the interest rate, the term of your loan, the amount you want to borrow, the repayment frequency, and the repayment type. It will automatically calculate what your home loan repayments will be.
In order for the calculators to work, you have to supply the relevant information. For instance, using our stamp duty calculator will require you to select the state you are in and the property type you are planning to acquire. You also have to indicate the property price. Following these steps will provide you the amount of tax you’ll pay on any property purchase.
How do home loan calculators determine monthly, fortnightly, and weekly mortgage repayments?
For the tool to calculate how much your mortgage repayment will be, it needs to know the home loan’s amount, interest rate, and term. You also have to indicate the frequency of your mortgage repayments: are you going to pay monthly, weekly, or fortnightly? Take note that this calculator assumes that you will be paying principal and interest.
Your mortgage repayment schedule is essential as it influences the total repayments you will make and the total interest your loan will accumulate. A monthly repayment schedule means you have to pay every specific day in a month. If you opt to pay fortnightly, it means you will have to settle your home loan repayment every 14 days or two weeks. You can also ask your lender if you can pay on a weekly basis.
Paying your loan weekly or fortnightly helps you pay off your mortgage sooner. A fortnightly repayment schedule allows you to squeeze in an equivalent of one extra month of payment — there are 26 fortnights a year, which is equivalent to 13 months.
So, assuming that you pay $3,000 monthly, this means that every fortnight, you pay $1,500. If you go with a monthly schedule, you would have paid $36,000 for the whole year. Changing your schedule to every fortnight, however, would let you pay $39,000 for the entire year.
Using the Mortgage Repayment Calculator, you will also find out that changing your repayment schedule reduces the amount of interest charged over the life your loan — albeit only slightly, especially if you do not reduce your loan term.
For instance, a $500,000 loan with an annual interest rate of 4.5% and a loan term of 30 years will require you to pay $2,533.43 monthly. Over the life of the loan, you will have paid $412,033.56 in interest. If you change your repayment schedule to fortnightly, still paying the exact same amount, the overall amount of interest you will have to pay drops to $411,599.13.
How much does interest rate affect your payments?
Interest rates are variable — they do not stay the same for a very long time unless you are on a fixed interest rate. However, even the fixed rate period expires; you can only expect to have the same interest for a maximum of five years.
A slight jump or dip in your home loan’s interest rate could mean a huge relief of a massive disaster in your budget.
If you are taking out a $375,000 home loan with an interest rate of 4.5% and a loan period of 25 years, you will only have to pay $2,084.37 monthly. Increasing your interest rate to 4.75% will make your monthly repayments $2,137.94. The difference seems small, but if you use our Mortgage
Repayment Calculator, you will discover that a 4.5% interest rate will only charge you $250,311.54 in interest, as opposed to $266,382.03 — that’s more than $15,000 in savings.
How can mortgage brokers like Edgeview Finance help?
While home loan calculators do not give you all the answers to your queries, it aims to help you assess your financial capacity and borrowing power before even applying for a home loan.
It is still a good idea for you to consult a financial expert to assess your situation thoroughly, which you can do for free here.
Mortgage brokers will be able to give you a deeper understanding of the results that you will be seeing from our Mortgage Calculators. They can provide you with advice and tips to make sure you grasp how home loans work.
Mortgage brokers can also assist you in getting the best home loan deals in town that perfectly fit your needs and capacities. Talk to a mortgage broker today and discover what you can afford!