Mortgage Calculator: Tool Shows How Rates and Deposit Can Dramatically Affect Payments | Personal Finances | Finance
In addition to getting an idea of how much they can borrow, mortgage calculators are often used to get an estimate of how much borrowers can expect to pay back based on the deposit they have deposited and the time they need to repay. In addition, these online tools can also be used to calculate the cost of different mortgage rates.
They are then required to enter the deposit amount they have available.
In doing so, the user is reminded that he will have to provide for other costs as well as the deposit when purchasing a property.
This may include mortgage fees, legal fees, and stamp duty property tax (SDLT).
Alternatively, for homeowners who want to see how a rise in interest rates would affect payments, they should indicate how much they have to pay on the mortgage – then nothing in the deposit field.
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Once this information is entered, the calculator displays a monthly amount that the mortgagee will have to pay.
This is a repayment mortgage – meaning the borrower will pay back what they borrowed for the mortgage, plus interest.
It is also possible to switch tabs, which displays a calculation for an interest-only mortgage.
The calculator allows people to change the price of the property and the amount of the deposit – as well as the length of the mortgage term in years and the interest rate.
Making changes to these factors may then result in an increase or decrease in the monthly payment displayed.
A warning is issued via this mortgage calculator.
“Make sure you can afford it,” says The Money Advice Service, before giving an example of increasing the monthly payment for a 3% change in the interest rate.
Data from Moneyfacts.co.uk last month revealed the increase that borrowers arriving at the end of an original term could experience when reverting to a Standard Variable Rate Mortgage (SVR).
The current average SVR for July 2020 turned out to be 4.46 percent, meaning that some borrowers whose mortgages matured after two years could see their rates increase by almost two percent.
Eleanor Williams, Finance Expert at Moneyfacts.co.uk, said: “Our latest research compares what borrowers with two-year fixed-rate mortgages taken out in 2018 are likely to face as they return. now at a follow-up or SVR – currently sitting at an average rate of 4.46 percent.
“The average two-year fixed rate at the start of July 2018 was 2.52%, which means those now reverting to their lender’s SVR could consider a rate hike of 1.94%.
Financially, it could have meant that their monthly payments would have increased by £ 202.08 per month had they not struck a new deal at the start of the month, when the average rate for a two-year deal was 1 , 99%.
“Given the current circumstances and the widespread household income concerns that many are experiencing right now, this payment difference could provide an extremely welcome boost to monthly income.”
Ms Williams added: “Those who are interested in determining whether they are able to lower their rate, and therefore their monthly mortgage payment, would do well to act quickly.
“As with any financial commitment, seeking advice from an independent and qualified advisor has never been more relevant, because understanding the true cost of any new transaction, taking into account the fees and incentives, and in fact keeping abreast of cash. the products and criteria could be greatly simplified with the help of a professional.