Mortgage calculator online
What is a mortgage calculator?
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A mortgage calculator is an online tool that works out what your monthly mortgage payments will be on the basis of the information you feed to it.
However, mortgage calculators are not all-seeing infallible mystics that magically tally up 'the damage' out of the ether. In the words of that well-worn phrase, garbage in, garbage out. A mortgage calculator is only as good as the information it has to go on, and even then the result should only be regarded as a guide.
To get the best out of a mortgage calculator have to hand a realistic idea of your financial circumstances and the amount you wish to borrow. In order to arrive at the bottom line, a mortgage calculator asks a series of relevant questions which we discuss here.
Firstly, the calculator will need to know the amount you want to borrow, the length of time you need to pay it back and the interest rate that applies to the mortgage. You may also be asked, depending on the complexity of the mortgage calculator, about a number of other variables such as any discounted introductory interest rates, etc.
Using all this information, the calculator's back office crunches the numbers to produce the monthly repayments. Again, dependent on the level of built-in whistles and bells, a mortgage calculator can also generate a raft of other information including:
- comparison of monthly payments for interest-only and repayment mortgages
- analysis of payments and the level of capital outstanding
- projections of interest and capital paid off during each year of the mortgage
Mortgage calculators are also a handy way to get a reality check on what you can afford to repay without resorting to a diet of baked beans. As a rule of thumb, aim for no more than a third of your monthly income. In some areas where house prices are higher than average, such as London or Edinburgh , it may not be possible to stick to this limit.
Working backwards, you can use a mortgage calculator to find out the maximum you can borrow against 33 per cent of your monthly income.
To get at this data, you will need to know how much you earn. Most people will know this already from their pay slips, but it may be more difficult to quantify a monthly income if you are self employed or have recently set up in business.
Working on the assumption of earning more as time goes by, enter the amount you wish to borrow, the likely interest rate and the lifetime of the mortgage. The figure produced is what you would have to pay each month. Compare this to a third of your monthly income.
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