Mortgage calculators are a useful core tool when you are buying a house. There are many to choose from and they all essentially do the same job.
But the better ones can give you some valuable insights, especially if you are focused on paying off your home loan as fast as possible.
Some people think that this isn't such an important objective now that mortgage interest rates are very low (and could possibly go lower).
But you might be surprised how much money is on the table even in these unusual times. (After all, it is your money we are talking about).
Two years ago, a 2 year fixed mortgage could be had at most of the main banks at 4.29%. Today that is 2.69%. And the best bank rate (Heartland Bank) is just 2.35%.
For borrowers who fixed two years ago on a 30 year table mortgage, they were paying mortgage payments of $2224 per month if they had purchased a median priced house nationally ($562,000) with a 20% deposit.
For the same borrowed amount today, based on a 2.69% rate the payments would fall to $1823 per month, a saving to a household budget of $400. In anyone's circumstances, that is a lot.
It is even more when you look at the lifetime payments. Total interest over that 30 year loan fell from $350,600 to $206,300, wiping 40% off the cost of the interest. That is a lot when you recall that your payments only went down 18%. If you ride the monthly payments down you are not paying off the borrowed amount any faster. And being realistic, you probably paid a lot more for the 2020 house than the 2018 one and therefore had to borrow more.
Making sense of all this is best done with a mortgage calculator. Our main one is very useful because it allows you to do two calculations side-by-side, making scenario analysis very much easier.
In addition, you can view the payment list and view graphs of the relative positions over the life of the loan by using this calculator.
The main advantage mortgage calculators offer is the ability to do 'sensitivity analysis' (just a fancy label for checking various scenarios or options). "What happens to my payments when the interest rate goes up?", "How fast can I pay off my loan?", "If I keep my payments unchanged when interest rates go down, how much does this shorten my loan?", etc.
The features of our main mortgage calculator allow you to easily do such calculations, with just a button selection within either scenario.
2 Comments
No arguments with that one!
But most people will play about with the % rate to see how much better off/worse off they'll be.
But if you play about with Price Paid a, say, $700k place will ultimately cost a buyer $926,800 in 30 years time, whereas if that same house only cost $350k ( as it would have done not that long ago) if would suck just $463,400 out of the owner bank account and leave the remaining $463,400 to do all sorts of other things - an extra $15,500 per annum.
And that's the tragedy of what we have developed. Everything now goes into the house, instead of the house and living.
And that's IF the cost of debt stays low......(Now you can go and play with the % rate and see what the results would be if mortgage rates revert to the "$350k" level of not that long ago - 8.95%!)
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