Properly preparing for a home loan can make a lot of difference to the chance of obtaining approval from a lender. Without the right documentation, records, or even knowledge it’s not uncommon for an applicant to find their hopes crumbling, as their bank finds a reason to issue them with a rejection. Not only can this is a very unhappy experience, it can also damage the potential borrower’s credit score – and this is something that can affect their ability to apply well into the future.
There are several ways to ensure that the application process goes as smoothly as possible however, one of which is by using a mortgage calculator to help with budgeting, finances and understanding how rates will affect repayments. Most tools are free to use and can offer a vast amount of information relating to costs – and this data can be very important for a first time applicant.
Are the calculators easy to use?
Different websites will typically offer tools that offer varying traits; but in most cases they will be straight forward to use. The input fields are simple to understand; all that a user will need to do is add their own relevant data and then click submit, to allow the tool to take care of the calculation. A final sum will then be presented and it’s this amount that will demonstrate how much a borrower can expect to repay each month, with interest.
How should I fill the input fields?
In a typical calculator, there will be roughly four to five fields that will need filling in. These include:
- A deposit field – this location is where the applicant should include the total sum that they’d like to include as their deposit. Some banks will require a minimum percentage of the total payment, but if this amount isn’t known, then it’s safe to assume that it will be between 10% and 20%
- A borrowing field – this is the main input area and should feature the total sum that the applicant would like to borrow. This amount should include the deposit as well, so if a person wants to borrow $100,000, with an upfront payment of 20%, then they deposit field should say $20,000 and the borrow field should state $100,000
- An interest rate area – this is one of the most important input options, as it will dictate how much an applicant can expect to repay over time. Most banks will offer information on their rates via their websites and so finding out the percentage that needs to go here can be fairly straight forward
- Repayment frequency field – there will then be options to select weekly, fortnightly, or monthly repayment plans and each type will affect how much will need to be repaid over time; interest considered. This input area can be played with, as can any of the others, until a suitable amount is found – one that can meet the applicant’s budget
The interest rate will add a small percentage on top of the cost of repayments, so this is one of the most important factors to get right before calculation. In the short term, an interest rate may only add up to a few dozen dollars, but over time (especially for mortgages with longer terms) this amount could end up costing a borrower hundreds, if not thousands, of dollars.
This is why it’s best to ensure that all data is as precise as possible when using an online mortgage calculation tool. With inaccurate information will come inaccurate results and there’s nothing worse than applying to a lender with a certain number in mind, only to find things being a lot more expensive and beyond a defined budget.