Getting your ducks in a row - using a mortgage calculator when buying a house

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Media reports have broadcast it’s a buyer’s market, and anyone who has an eye on real estate will have seen a sea change.  Even The Block’s auction fizzer has put a spotlight on the opportunity!

The market has softened, interest rates are still relatively low, Canterbury in particular has good housing stock and this all means there are some good ducks in a row if you are looking to buy.

But there’s always one more duck to line up – you need to know what the best deal is for you specifically. Everyone is different in this regard.   

Whether you are good with numbers or not, using a mortgage calculator will give you a clearer picture.

Consider all the variables when buying a house

Your income, the interest rate, the loan term and the size of your deposit, will all help you determine the best mortgage for you. 

Before you get too far down the track, it’s important to understand the difference between what you can afford and what you should afford.  Knowing this early on will avoid some disappointment later.

A 30-year term with smaller installments might sound tempting and might mean you can afford more, such as a bigger house in a nicer area.  However, when adding up all the interest over the years will it look so attractive and wouldn’t you rather be debt free earlier?

Conversely, larger monthly payments might look affordable now especially if you are a couple with two incomes, but what would be the situation in the future if you start a family or one of you loses your job?  How would you manage mortgage payments then?

This is where a mortgage calculator can provide real windows on the future.  In essence they are a forecasting tool to help you plan. They also help you understand your own desires as a house owner, or owners. 

In many respects, a mortgage calculator is a catalyst for very important financial discussions as you contemplate probably the biggest financial decision you will ever make!

But while you can sit at your kitchen table and punch in numbers and get results it’s also important to have external advice, such as using a mortgage broker to help you appreciate your long term financial capabilities to minimise any bumps in the road in years to come.

Getting the Most out of a Mortgage Calculator

The basic function of a mortgage calculator is simple: you input numbers into appropriate fields and it provides you with results and information that helps you make a mortgage decision.

A simple mortgage calculator allows you to compare multiple scenarios and terms quickly. For example:

  • See whether a 25-year or 30-year mortgage works better for you by inputting different loan terms and other variables, as needed

  • Find out the exact differences that interest rates will have on your payments – for instance if interest rates increase by 1.5% what will the affect be?

  • See the total cost of interest over the term and how increasing your principal payments, as your salary increases over the long-term, will affect the mortgage, or the opposite as the case may be

Because they can generate such forecasts instantly, mortgage calculators are great for comparing multiple lenders or different options from a single lender.  Other calculators might include additional variables, comparative forecasts, or data visualisation, which is useful if you prefer seeing graphs and images, to numbers.

Shop around for the best mortgage calculator for you

There are a wide variety of calculators covering different questions or forecasts, so you can search around to find one that answers your particular question.  

For instance, you may be the type of person who wants to work really hard for the next 20 years to be debt free, so as to have more time later to enjoy family, pastimes and a better work-life balance.  If this is the case, you can use a calculator to map out your best first step. 

On the other hand, you may be someone who wants to pay less on repayments but over a longer term, so you have some spare cash to enjoy life a little more along the way.   Whatever your aspirations you can use a calculator to plan, dream and be realistic about what is possible.

Calculators can help you figure out how much you can afford in terms of regular payments or total costs. They can help you decide on the balance between interest-only, and principal and interest loans, as well as a mix of loans with different terms and interest rates.  If you find that your career forecast is better suited to one term or another—20 years versus 30-year, for example—then you might narrow your search to include only terms of that type.  The scenarios are many!

And if your dream home requires some renovation, then yes, there are calculators for that too! Specialised calculators cover costs for everything from landscaping to plumbing to roofing. Run the numbers on these after scouting out potential homes and see if it’s in your budget—or if you just need to adjust some terms on your mortgage to make your dream a reality.

Some of the recommended calculators are:

Figure out finer points with a Mortgage Broker

A mortgage calculator is great for examining your financial capacity and your options.   To get a handle on the finer points of your local real estate market, however, it’s best to also seek the advice of a mortgage broker.

Mortgage brokers can provide you with up-to-date information on the offers of several lenders, reducing the research and legwork you might have to do. If a mortgage calculator makes it easy to find out what you can borrow, a mortgage broker will get you the best insights into what people are lending. Remember they are working in the mortgage market all the time so they can provide information and background you won’t find by simply using a calculator.  And best of all, you need not worry that using one will cut into your savings—mortgage brokers collect commissions from lenders, rather than charging clients.

Working with a mortgage broker also gives you a more subtle, but crucial advantage in playing the current housing market: they can vouch for you to get better deals with banks.

Under the current housing market conditions, banks are fairly strict with their criteria for loans.  With a mortgage broker mediating for you, however, banks will consider not just your income and credit history, but also their business history with your broker. Thus, a well-established broker can get you loans you might otherwise not have access to.

Get in touch with a mortgage broker

For the best outcome, of course, you should put the two together. A mortgage broker can get you the best loans on the market, but it’s also up to you to do some homework and research when looking for your dream home and ultimately deciding how you get there.

What are you waiting for – now’s the time?  If you are in the market for a house, talk to the mortgage brokers at Taurus today - we look forward to helping you buy and then settle into your new home!

Paul Townsend 
Mobile: 027 352 6262
Phone: 03 366 6087

Website: http://www.taurushomeloans.co.nz/contact/

Posted 28 Sep 2017