What is a mortgage calculator?

When looking for mortgage info on the internet, you are likely to come across pages containing a mortgage calculator. Mortgage calculator has even become the most popular mortgage-oriented search engine search query in the United Kingdom. But what exactly are mortgage calculators? How do they work, and most of all, why do I be interested in using one? Let s find out.

A mortgage calculator is a tool on a page that will provide you with some help to determine your mortgage repayments based on your own circumstances. You normally need to provide some inputs (loan amount, mortgage term, mortgage interest rate), and in return the calculator will tell you what your potential payments will be.

These calculators are normally very easy to play with. There are multiple variants available but all mortgage calculators essentially work in the same way: you enter info on your mortgage, and the mortgage calculator will tell you how much your monthly repayments are. Let s examine the inputs required by the calculator in a bit more more details:

The 1st input is typically the loan required. You may see other terms such as mortgage amount or your mortgage . This is simply the total amount of the mortgage you wish to borrow your broker. The initial deposit is not part of this amount.

repayment term: also called repayment period , or How long is your mortgage for . This is the period over which you wish your mortgage to be paid back. If you choose a short loan term your monthly payments will be high, but you will pay less interest in total. A longer mortgage term will result in smaller repayments every month, but you will repay more overall for your mortgage, as interest needs to be paid for every additional year for which you want your mortgage.

Interest rate interest rate: this value is the interest rate that will apply to your mortgage, for the term you have chosen. Most mortgages at the moment come with different interest rates for different terms. Most mortgage brokers provide promotional low rates for the initial years of the mortgages, switching to a less interesting interest rate after this period. It is therefore vital that you make use of the mortgage calculator several times to take this into account. If a discounted rate applies for the initial 4 years, use the calculator with this mortgage term of and the promotional rate. You then need to perform another calculation with the new, non discounted mortgage rate for the reminder of the term.

The monthly payment amount: you might see it called mortgage repayment , it is basically the total you will have to pay back to your lender monthly to pay back the amount you have borrowed. Interest only payment: this is the monthly payment in the case of an interest-only mortgage deal, for which your mortgage repayment only covers the interest on the mortgage and does not repay the capital amount. In an interest only mortgage deal, the mortgage loan is not paid back at the end of the term.The monthly repayment amount is the amount you must pay every month to repay the loan on your mortgage. Two amounts are typically provided, a monthly repayment and an interest only repayment amount. Interest only payments are for interest only mortgage deals where the amount of the loan is not repaid at the end of the mortgage term. Interest only mortgage deals are usually for buy to let investors.