How the home loan calculator can help
One of the biggest questions you have to answer before even thinking of buying a home is whether you can afford to service a home loan.
Manually calculating how much your home loan repayments will cost is very taxing — you might make a mistake or two if you decide to crunch the numbers yourself. Budgeting tools like home loan calculators are a must to make sure you get your estimates right.
Your Mortgage's Home Loan Calculator offers convenience. Not only does it help you determine potential payments, but it can also assist you in calculating how much you can afford to borrow and how long it will take to pay off your home loan.
How to use the home loan calculator
There are three ways you can use Your Mortgage's Home Loan Calculator — you can determine how much your repayments will be, the amount you can borrow, and how long will it take for you to finish your home-loan.
A. Home Loan Repayments
Want to know how much you will pay for your repayments if you pay principal and interest? This tool will do the job for you.
Just input the loan amount you wish to borrow, the interest rate, and how long you are planning to pay for your mortgage in years, and you will get instant results.
Using this tool, you can determine how much a $500,000 home loan with an interest rate of 5% and a mortgage period of 25 years would cost you. Supplying these data to the calculator will yield results for different repayment schedules: $2,922.95 (monthly), $673.99 (weekly), and $1,348.30 (fortnightly)
B. Home Loan Amount
This calculator also works in reverse — it will let you know the amount of loan you can afford by working on how much you can pay monthly, the interest rate, and the length of your mortgage.
Say you are willing to pay $2,500 month for a span of 25 years at an interest rate of 5%. Based on this data, the calculator will tell you that you can afford to borrow as much as $427,000.
Change the mortgage period to 20 years and the amount of mortgage you can afford goes down to $379,000.
C. Home Loan Period
If you are a type of borrower who is more concerned about how many years you will have to pay for a home loan, then this calculator is right for you.
This calculator gives you an idea of how long it would take you to settle your mortgage by using three figures: your loan amount, the interest rate, and your monthly repayments.
For example, it would take you roughly 23 years and 10 months if you borrow $500,000 with a 5% interest rate and a $3,000 monthly repayment. If you make your repayments bigger, say at $3,500, then it will take a little over 18 years to repay the loan.
Find an experienced mortgage broker to help you with your loan here.
How much can I afford to borrow?
To fully gauge how much home loan you can borrow, you also have to consider other factors, not just how much you are willing to pay monthly.
Your household income is a crucial factor in determining your borrowing power or capacity.
Your income should not only be coming from a steady source, but it should also be enough to cover the likely repayments on your loan as well as the other costs involved in owning a home.
When calculating your borrowing power based on your income, you also have to take into consideration your daily expenses — you would not want to leave out your essential spending. You have to make sure that you do not spend a considerable slice of your income on your mortgage repayments.
Another factor that would certainly impact your borrowing power is your other financial commitments and expenses. Do you have an existing loan? Are you subscribed to a mobile plan? How much do you still owe in your credit account? Having too many financial responsibilities might significantly hamper your borrowing power.
How long will it take to pay off your mortgage?
The time you will likely spend paying off your home loan depends on the following factors: the amount and the frequency of repayments, the overall loan amount, and the interest rate charged.
A single change in any of the factors could shorten or lengthen your mortgage period. Let's say you have a $500,000 home loan with an interest rate of 4.5%.
If you decide to pay $2,500 monthly, you will have to spend close to 31 years to finish paying your mortgage off. However, increasing your monthly repayments to $3,000 shaves almost 10 years from your original mortgage period, bringing it down to 21 years and 11 months.
Changing the frequency of your repayments also influences the time needed to pay off your mortgage. Assuming you switch into a fortnightly arrangement and pay $2,000, it would take you only 12 years and eight months to finish paying for your home loan.
How can mortgage brokers help?
Confused about which home loan products would work best? Mortgage brokers have your back. They can help you find the ideal home loan based on your needs and borrowing power.
They can also extend a helping hand in estimating your repayments and determine ways to pay off your mortgage quickly without hurting your pocket too much.
Mortgage brokers also have access to the best deals currently in the market. Are you looking for a low interest rate home-loan? They can connect you with the lender that offers the cheapest mortgage. Want to get home-loan features that can help you save money throughout your loan period? Brokers can give you several home-loan offerings which are suited to your needs.
Before using our home loan calculators...
It is essential to understand that home loan calculators are just tools to guide you in estimating your potential mortgage repayments.
Note that these calculators assume that interest rates do not change over the life of the loan, which is quite unlikely in real life.
Even if you have a fixed-rate home loan, your interest rate will eventually switch to a variable one once a certain period ends.
Furthermore, these calculators do not take into account the fees you have to pay upfront and through the life of the loan.
These costs could significantly impact how much and how long you would pay your mortgage. It is imperative to ask your broker or lender about the fees and charges associated with your home loan product as well as its terms and conditions.
To know more about home loan fees and charges, check out this guide.
Lastly, using this calculator does not guarantee that you will qualify for a home loan. Your application will go through a rigorous analysis by your lender and you will have to meet all the lending criteria to be able to get approved.