May 22, 2019 | 06:07 AM

Property & Home

24.08.2018Why using a mortgage calculator is a good move

The mortgage calculator is a tool that comes with a lot of benefits no matter what stage of the application process you might be at.

Applying for a mortgage can sometimes seem terrifying. After all, it’s often the largest investment that a person will make in their lifetime. As a result, it’s vital to get it right – and the chances of doing so are raised by using as many online tools as possible. The mortgage calculator is just one of those tools, but it’s one that comes with a lot of benefits no matter what stage of the application process you might be at.

The benefits

Being armed with knowledge is by far the best way to make sensible financial decisions. Mortgage calculators can provide consumers with a range of information, including the total amount their mortgage will cost and how much they’re likely to be lent by a bank or other provider. This empowers them to filter through a list of mortgage providers and discover which one offers them the best deal.

Choosing a calculator

It’s important to use good judgment when choosing a mortgage calculator. Some calculators are provided by the mortgage lenders themselves, and while these are tempting because of their handy design and ease of use, providers will often use the information given to serve the consumer a specific product from the range. In some cases, providers may also ask the consumer to give an email address or other contact detail in order to send them the calculations – making it in essence a marketing tool.

In Australia, the best option is the mortgage calculator on the MoneySmart website, which is run by the Australian Securities and Investments Commission. This calculator provides unbiased, objective information, which means the user won’t need to worry about whether the results are serving some other, more commercial need.

What’s needed

There are several information fields on MoneySmart’s calculator which users will need to fill out in order to get a comprehensive result. If they’re looking to find out the amount they’ll need to start repaying per month, for example, they’ll need to input details like the total amount they’re looking to borrow, the stipulated frequency of the payments (usually monthly, but sometimes weekly or even quarterly), the full duration of the loan, and more.

The consumer may also be looking to find out how much they’ll be able to borrow – and there’s a calculator for that, too. For this, they’ll need to work out their ongoing fixed costs and how much these costs will take out of their salary in order to calculate an “affordable repayment” figure. Again, the user will usually be asked to insert the duration of the loan, and possibly their maximum acceptable interest rate level too.

Things to note

As is the case with almost all online tools designed to make life easier, mortgage calculators aren’t perfect. Firstly – and perhaps most obviously – they aren’t designed to be foolproof. In some cases, a consumer may find that the actual process of applying for a mortgage will be very different. They will probably find that their lender asks much more detailed questions than any online calculator will!

Many mortgage calculators also make certain assumptions in order to make the process as simple as possible. It’s not usually possible to take varying interest rates into account, for example, and as a result the calculator will often provide a minimum estimate instead of a fixed amount.

With useful resources like online calculators on hand, applying for a mortgage doesn’t have to be a scary process. A good mortgage calculator can benefit consumers because it provides key information which helps them make decisions about which mortgage provider to go for – and which one they can afford. By gathering the relevant information upfront and looking for a calculator which suits their needs, a potential borrower can make the most of these tools in just a few short steps.

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