The Mortgage Calculator: Making Savings For You

Knowing which mortgage to choose can be incredibly difficult, especially if it's your first time. There are mortgage interest rates, fees, charges, loan terms and too many other aspects of a mortgage product to consider. For many people, the choice of which product comes down to interest rate, but sometimes a product with a low interest rate can actually cost you more than one with a higher rate.

Using a Mortgage Calculator Simplifies Things

You need a degree in mathematics to understand some of the features of a mortgage. It's complicated stuff. Using a mortgage calculator can simplify things somewhat. This clever tool can allow you to compare many different features of many different mortgage products. The first things you will want to consider when applying for a loan is the mortgage interest rate attached to the product. The mortgage calculator will allow you to enter in the price of the home and the interest rate to see what your repayments will be. The other great thing is that you can see how much of your repayment is principal and how much is interest. Actually it can be pretty scary! You can also see how much a mortgage will actually cost you once all of the interest has been added on.

Features of the Calculator

Before you decide on which mortgage to apply for, take hidden fees into account. Some banks offer low mortgage interest rates but have a lot of fees which add up quite quickly. There may be an application fee, which is pretty standard. An annual service fee can often be a killer. A few hundred dollars a year doesn't sound like a lot when you sign on the dotted line, but multiply that over the thirty years of your loan. It becomes a lot very quickly and cancels out any interest rate discount you may have got. Keep an eye on service fees as well. Are you going to be charged for paying extra on your mortgage, or for drawing out money? What is the default interest rate if you miss a payment? It's easy to skim over these things when you are excited about buying a home and just waiting to hear that you are approved, but ignoring them could cost you a lot of money in the long run. A good mortgage calculator will allow you to take fees and charges into account. Make sure you do this when you are comparing different mortgage products as it often makes the difference between a cost effective home loan and a very expensive loan. Have a look at packages where you link up your savings account to your mortgage. Not only are these products convenient but they often can save you a lot of money also. Using the mortgage calculator you have probably noticed that for the first five years of your loan term you are pretty much just paying off interest. This fact on its own is depressing, but its one you need to be aware of. Unless your Great Aunt Mildred was a millionaire and left it all to you, you are going to need a home loan. Paying a heap of interest to the bank - particularly in that first five years, is unavoidable. When you buy a home keep this in mind. If you are going to need to shift within five years, you may like to rethink your choice of home, or even buying a home in first place. Most of the money you are paying out is going straight to the bank.

In a Perfect World...

Ideally, you want to live in, or own a home for ten years so you have at least paid off a good amount of the principal before you sell. Otherwise, you are simply moving to a new home and paying off that five year block of interest from the beginning all over again. In years gone past strong growth has meant that real estate prices have increased. When people sell for a good price they clear enough money not to notice that they have paid most of it to the bank in interest. In the current financial climate it looks like this will no longer be the case. Be aware of this before you buy a home and sign up for a mortgage. Another great feature of the mortgage calculator is being able to see the amazing amount of money you can save buy paying extra off your home loan. If you can afford it, just fifty dollars a week will cut years off your loan and save you thousands in interest. It's worth having a look at this feature on a mortgage calculator, even if you already have a home loan. If you are in a financial position you may wish to pay extra off your loan.

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