Before you enter the best mortgage deal for your credit profile, you need to ascertain whether the repayments are affordable to you. Paying your mortgage requires affordability. However, extending the repayment term unnecessarily increases the amount of debt interest that you will pay. A mortgage calculator enables you to optimise the repayment term based on your personal circumstances.
How to use a home mortgage calculator
How much do you want to borrow?
Enter the size of the loan. This includes your existing mortgage, personal debts which you plan to consolidate, the cost of any home improvements, new purchases and any charges incurred when setting-up the loan agreement. Term of a loan mortgage
The amount of time in which you decide to repay the debt will determine the affordability and the amount of interest you will repay. Entering different repayment terms will help you optimise the repayment term. Rate of APR on the loan
The interest rate is determined by your credit profile. The lower your home loan quote, the less interest you will pay on the principal. A low APR also means that you will make lower loan repayments each month.
What your mortgage calculator is telling you
Cumulative interest on the best home mortgage
The longer you take to repay the debt, the more interest you will repay over the life of the loan. For example, borrowing £100,000 over ten years at 5% APR will accrue £27,320 of interest. However, increasing the repayment term to 20 years will accrue £58,400 of interest. This is 113.8% more cumulative interest. Reduce repayments with a low remortgage rate
Paying a low rate of interest is important. However, the term of the loan normally has the greatest bearing on how much you will repay on your mortgage home loan each month. For example, borrowing £100,000 over ten years at 5% APR will cost you £1,061 per month. However, increasing the repayment term to 20 years will cost you just £660 per month. Are the repayments affordable?
You need to establish the optimal term of repayment. Although shorter mortgage deals result in the repayment of less interest, can you afford the repayments? If you have already chosen the maximum term, even the cheapest mortgages could leave you financially exposed. If you have chosen a tracker deal, could you cope if interest rates were to rise? You need sufficient disposable income to cope if the rate of interest or your personal circumstances were to change.