What is a mortgage calculator?

When searching the WWW for mortgage resources, you will often see web pages containing a mortgage calculator. Mortgage calculator has even become the number 1 mortgage web search query in the UK! But what exactly is a mortgage calculator? How do they work, and above all, why do I be interested in using one? Let s have a look.

A mortgage calculator is a tool on a website that will provide you with some assistance to calculate the mortgage payments based on your own situation. You normally have to provide some inputs (mortgage required, mortgage term, mortgage interest rate), and in return the calculator will tell you how much your potential monthly repayments are likely to be.

A mortgage calculator is normally quite easy to use. There are different types available but all mortgage calculators actually function in the same maneer: you provide info on your mortgage, and the mortgage calculator will calculate how much your monthly repayments are. Let s have a look at the various inputs required by the calculator in more details:

Loan amount: this might be called amount required , your borrowing amount or How much would you like to borrow . It is basically the amount you wish to borrow from a mortgage provider. This doesn t take into account the intial deposit generally wanted by most lenders.

Mortgage term: also called mortgage period , or How long is your mortgage for . This is the period of time over which you want your loan to be repaid. If you choose a short repayment period your monthly repayments will be high, but you will pay less interest over the whole term. A longer loan term will provide with small payments every month, but you will end up paying more overall for your mortgage, as interest has to be paid for any extra year for which you want your mortgage.

Interest rate interest rate: this is the interest rate that will apply to your mortgage, for the term you have chosen. Most mortgages these days apply different mortgage rates for different terms. Most lenders offer promotional low rates for the first years of the mortgages, changing to a higher mortgage interest rate after that. It is therefore vital that you make use of the mortgage calculator multiple times to take this into account. If a reduced rate applies for the initial 5 years, do a first calculation with this mortgage term of and the promotional rate. You then need to do another calculation with the new, non reduced interest rate for the rest of your mortgage.

The monthly repayment amount: you might see it called mortgage repayment , it is basically the figure you will have to pay back to your lender every month to pay back the amount you have borrowed. Interest only payment: this is the monthly repayment applicable to an interest-only mortgage deal, where your monthly payment is limited to the interest on the mortgage and does not repay the capital amount. For the case of an interest only mortgage, the mortgage loan is not paid back at the end of the term.The monthly payment amount is how much you will pay every month to pay back the loan on your mortgage. 2 figures are usually provided, a monthly payment and an interest only payment figure. Interest only payments are for interest only mortgages where the amount of the loan is not paid back at the end of the mortgage term. Interest only deals are normally popular with buy to let investors.