Mortgage is not a small decision, for many of you, it is ‘once in a lifetime’ decision. With the desperate desire to own a ‘home sweet home’, you invest all your efforts and focus to get a deal that suits you best. Rational calculations and calculative decisions are necessary for that. And this is not something that you can do on your fingers. Something very smart and near to perfect is desirable.
Is there anything like that? Oh yes, the very known mortgage calculator that detects the total cost of a deal. In fact, it has many more uses to make the situations predictable and financial decisions on home buying easy.
What exactly a mortgage calculator does?
A mortgage calculator is a financial tool that helps you know the estimated total cost of a mortgage.
It tells you the following things –
- The amount limit that you can borrow
- Your monthly payments/instalments
- Impact of an overpayment on your mortgage
- Extra amount that you can borrow on an existing mortgage
- How an interest rate can affect your affordability and the whole deal
When you know so much in advance about something, obviously it becomes easy to take the decision.
Mortgage types affect the result of calculator
There is not only one type of mortgage. There are several kinds of mortgages and that type affects the result a calculator gives.
- Fixed rate mortgage – A type in which your rate of interest is sure to stay same for a certain period of time.
- Tracker mortgage – In this version, the rate of interest is affected by the external rate. This is usually Bank of England base rate in addition to a set percentage.
- Offset mortgage – When a bank account that has your savings is linked to your mortgage, the saved amount is subtracted from the home loan amount. This has two benefits – Either you can pay off your mortgage quickly or pay less each month.
- Interest only mortgage – This allows to pay off only interest on the borrowed amount and not the capital.
What are the different types of mortgage calculator?
You may find this amazing but yes, for different purposes there are different types of mortgage calculators. You want to know about them? It is good to have a knowledge on this part as the financial decisions should be backed by adequate information.
There are multiple things that you and the lender work on and for that, varied types of calculations are necessary. This raises the importance of variety in calculator types. For instance –
- Repayment calculator – Know about your monthly instalments according to the loan size, interest rate, term and fees.
- Overpayment calculator – This tells how much you can save on interest rates by making regular overpayments.
You can make overpayments in two ways –
- Either pay one big lump sum amount
- OR, pay an extra amount with monthly instalments
- Base rate calculator – It tells about the extent up to which your payments can get affected due to change in the base rate of Bank of England.
- Mortgage deposit calculator – Through this you can get to know that what duration it will take to save a certain deposit amount for a particular property in a certain area.
- Stamp duty calculator – As according to the name, it calculates the stamp duty for the property anywhere in the UK. This normally includes in the overall cost a calculator shows. For instance, the Natwest mortgage calculator includes this.
- Loan to value calculator (LTV) – This gives a calculation of property value, deposit amount and your equity to know your affordability against the loan amount.
- Mortgage interest calculator – Mortgage market is prone to ups and downs of interest rates. Interest calculator gives you an estimation of the effect of the change of rates on your monthly mortgage instalments.
Facts about mortgage calculator
Before you use the calculator, it is important to know about some facts. They can help you erase the misconceptions (if any) about the utility of calculators.
- The results that you see are based on the mortgage type that you enter in the mortgage calculator.
- The calculation you get on a deal is based on the details you have mentioned in the calculator. This is the estimated figure, which comes without being performing affordability or background checks.
- Regarding interest rates, the mortgage calculator works on the yearly interest rate which is same and applicable on the whole complete mortgage term. But in reality it may change as the mortgage market is sometimes unstable and changes in the rates happen.
- You can always change the values that you mention in the calculator. It helps to know how those changes can help make the deal more affordable.
It is better to first know about the calculators and then use for the best possible results. Several choices like money saving expert mortgage calculator can help you get the better calculations.
Rational decisions are always best when it comes to big money investments. Home is the most precious asset and it should be handled with care. If calculators can help you do that, why not use them and make your mortgage journey predictable.