Ocean's new mortgage calculator – have you given it a try?


Ocean's new mortgage calculator – have you given it a try?

If you’re planning to apply for a mortgage any time soon, it’s really worth using a mortgage calculator.

It can help you work out what you can afford to pay each month on your mortgage. From this, you can calculate how much you can afford to borrow – and you can use this figure as the basis for your house hunt.

What can you afford?

It’s very important you don’t borrow more than you can afford to when you take out a mortgage – and chances are, the lenders you apply to won’t let you.

Since the release of the Mortgage Market Review a couple of years ago, lenders take real care to make sure that borrowers don’t over-stretch themselves by borrowing more than they can afford to comfortably repay each month. When you apply for a mortgage, you’ll be asked lots of questions covering everything from your income and job security to how much other credit you have and what you spend each month on luxuries.

You’ll also be put through a stress test – which isn’t quite as dramatic as it sounds. It’s actually a way for the lender to work out whether you could carry on repaying the mortgage you’ve applied for if interest rates when up and your monthly repayments increased. If you can’t, you may be turned down – even if you can afford the repayments at the current advertised rate.

As you can see, you’re only likely to be accepted for the mortgage you want if your lender believes you can comfortably repay it. This makes good sense for you too, as you may quickly go off your new home if you’re spending so much on the mortgage you can’t afford to pay for anything else.

How can a mortgage calculator help?

So how exactly does a mortgage calculator help in all this? Well, to start with it lets you work out how much you can afford to borrow.

Take the Ocean mortgage calculator – you enter the amount you’re thinking of borrowing, the number of years you plan to spread your repayments over and the APR. The calculator will then tell you how much your monthly payments are likely to set you back.

If you know this is more than you can afford, it might be a good idea to reconsider your budget. Once the calculator gives you a monthly payment you can comfortably afford, you’ll be able to put together a more accurate budget. Just remember that the calculator results are an estimate, and your actual repayments won’t be confirmed until your application is accepted.

What if you’re a homeowner?

If you already have a mortgage and own a home, don’t assume that a mortgage calculator won’t be useful. In fact, it can help you work out whether you could be on a better deal.

As well as showing you what you’ll pay each month and the amount of interest you’ll be charged, the calculator also gives you the option of putting in a bigger monthly payment. It then shows you how much quicker you’d pay off your mortgage if you paid this.

For example, say you have £100,000 left on your mortgage, your term will finish in 20 years and you’re paying £506 a month. If you could afford to pay £600 a month, you’ll be able to clear your mortgage three years and eight months earlier than you planned. A shorter mortgage term means you’ll also pay less interest overall.

Using a mortgage calculator to work out how much you’d reduce your term by if you overpaid is a good way of figuring out if it’s a step worth taking. Some mortgage lenders charge for early repayments, and you can decide whether this will cost more than the money you’d save making overpayments.

As you can see, a mortgage calculator is a useful tool to have whether you’re house hunting or you own your home. And we have a range of calculators you can use when you apply for credit, like this loan calculator and this credit card calculator.