There are two situations where using a mortgage repayment calculator is a must...
The first is when you’re looking for a new mortgage and the second is when you want to start making overpayments.
Ocean’s mortgage calculator can help you with both of these. Read on to find out how to use a mortgage calculator to your advantage.
Looking for a new mortgage
If you’re buying a property and looking for a mortgage, Ocean’s mortgage calculator can help you work out how much you can afford to borrow. This, in turn, can help you set a budget for your house search.
This is important – you may have an area or type of house in mind, but if you’ll have to over-burden yourself with a huge mortgage to afford it, you might want to rethink. Plus, the mortgage lender you apply to may turn down your application if they think you’ll struggle to make the repayments, and this is bad for your credit history.
Use a mortgage calculator to work out how much you can comfortably afford to borrow and then use this figure as the basis for your search.
Enter the amount you’d like to borrow (the average price of the houses you’re looking at minus the deposit you’ve saved), the mortgage term (how long you’ll make repayments for) and the APR and the calculator will show you how much you’ll pay each month and how much you’ll spend on interest.
If you know this monthly repayment will stretch your finances to the limit, it’s best to set a new budget. The lenders you apply to will want to see that you can afford your repayments and will also work out whether you’d still afford them if interest rates went up. If you couldn’t, it’s likely they’ll turn you down.
As well as being a useful tool if you’re buying a property, a mortgage calculator can also help you out if you’re thinking of remortgaging. You can enter the details of the mortgage deal you’re thinking of switching to and see how it compares to the one you’re on.
If you are remortgaging, be aware that your current lender might charge you for an early repayment. Carefully consider whether you’ll still save money by switching even when this is taken into account.
Remember that the results a mortgage calculator provides are only estimates. Ultimately, the amount you pay will depend on the specific deal you sign up to.
Overpay to be mortgage-free early
A mortgage calculator can also help you if you’re considering making overpayments on your mortgage. Not all lenders allow you to do this, but if they do it’s well worth doing as it could shave years off your mortgage term.
Use the Ocean mortgage calculator as we’ve described above, and on the results page there’ll be the option of entering a new monthly payment or lump sum payment. Do this and the calculator will show you how much sooner you could clear your mortgage if you did this – and how much you’d save in interest.
Overpaying now won’t mean you pay less each month later. Instead it means that you’ll reduce the amount of time you’re making repayments for, and this can save you money in interest.
Your current mortgage repayments might be what you could afford to pay each month when you took the mortgage out. If your circumstances have improved since then, it’s really worth speaking to your lender to see if you can pay more each month.
If this isn’t an option, you could up the amount you pay when your current deal ends and you apply for a new one.
Disclaimer: All information and links are correct at the time of publishing.