Buying a home? Congratulations. Now here’s some advice: use a mortgage calculator. Even if you’re not buying a home, but are considering re-mortgaging your property, or even transferring your mortgage elsewhere to try to get a better deal. Using a financial calculator to work things out puts you in a much better position. After all – if it’s good enough for the experts to use, why should’t you have the opportunity?
If you go to a finance broker or a lender, they’ll use computer based calculation systems to work out the best mortgage for you, but it always pays to check and compare using a online home loan calculator. Doing a little homework of your own helps you level the playing field quite a bit.
When you’re looking for a mortgage, especially in today’s rather turbulent and uncertain financial world, there are so many variables to consider, each of which might well change very rapidly. Available interest rates, mortgage types, mortgage periods and many other factors can make a considerable impact on your wallet.
Unlike with home loans, car finance, boat loans and other financial arrangements, mortgages tend to be commitments for a very significant chunk of our lives. Therefore, it is so important to make sure that you go into such an arrangement, or even just go into discussing such an arrangement, with your eyes wide open and a few numbers clearly worked out.
Advantages Of A Mortgage Calculator
One of the biggest advantages of using a mortgage calculator is that you can play around with the ‘what if’ question in your head. You may well have assumed that you fitted the typical scenario, or had an idea in mind – perhaps that you would stick with a 25-year mortgage perhaps. However, using a calculator allows you much more freedom to experiment, and try out things that perhaps you wouldn’t normally consider when sitting in an advisor’s or broker’s office.
For example, if you have assumed that you will be planning a 25 year mortgage, have you considered how much better off you’ll be per month if you stretch this to 30 years? If you are young and have a good long working life ahead of you, this might well work out at a much lower repayment, providing you with that extra bit of security and peace of mind should interest rates change, and payments go up. Even if your own circumstances change.
Perhaps you are planning a family, and have considered the financial commitments in light of future changes, but what would happen if you ended up with twins, triplets? There are a million and one ways in which life can throw us a curve ball, and it pays to have a reasonable safety net in place to make sure that we can cope.
However, try to get an agreement where you can pay extra without penalty later in life, once you are earning a lot more. Another advantage of paying over a longer period is that inflation reduces the real value of what you have to pay, so that $1000 a month now might be equivalent to $500 or less in 25 years time.
On the other hand, if you have been assuming you’ll need 25 years to pay off your mortgage, what about seeing if you can reduce this time frame? Why not experiment and look at 20 years? 15 years? For some people this might be impossible, but you could be surprised at how the monthly payments change, and paying off some mortgages over a much shorter period of time can massively reduce the amount of interest which you pay. In this way, although your monthly payments might be higher, they may well be nowhere near as high as you might have otherwise assumed.
And that’s the difference with using a mortgage calculator – it helps to take out the gray unknown that exists between knowledge, and your assumptions. It could be that your assumptions are correct, or at least reasonably accurate, but in many cases they can easily be challenged. Using a financial tool like this helps to turn assumptions and guesses and turns them into knowledge. And as the old adage goes – knowledge is power. Knowing what your choices are, and how they will affect you, puts you in a much more powerful position when it comes to talking to mortgage arrangers, financial advisors and mortgage brokers.
The same is true for many financial arrangements – whether you’re looking for a home loan or finance for a car, using a finance calculator which is set up to allow you to play with the figures, including repayment amounts, total loan, period of repayment, interest rates and such like helps tremendously.
