When Australians are hunting for and comparing home loans it’s useful to use the tools on the personal finance sites out there. These normally include a maximum borrowing calculator, a Lenders Mortgage Insurance calculator, a home loan repayment calculator and a stamp duty calculator. These tools allow you to find out roughly how much the bank will lend you, what different loans will mean to you in terms of repayments and interest and also how much some of the government fees will be.
A good home loan repayment calculator should enable you to compare monthly, fortnightly and weekly commitments when purchasing a property to live in yourself or for Investment Purposes. It should also show you the Total Interest you will pay over the loan period.
Usually on a home loan repayment calculator you will enter the loan amount, the interest rate of the loan, the loan term in years and the payment frequency on one side of the calculator. It will then instantly calculate the number of installments, the regular payment, the total of the Principal plus Interest and then a breakdown of the interest paid.
Obviously this functionality of the home loan repayment calculator allows you to play around with the numbers and compare home loans better. For example, what happens to the repayments if you extend the loan period from 25 to 30 years? What happens if you lower the loan amount by putting a larger down payment on the property? What happens if the interest rate changes? All these factors will affect the repayments, the regular repayments and the interest paid.
Of course there are different types of loans. Principal and Interest loans include variable rate loans and partially fixed rate loans. In these situations most of the home loan repayment calculator models will not be very helpful because there is no way of knowing what the interest rate will do in two years’ time, for example. If the cash interest rate drops from the Bank of Australia then the total repayment on the loan will likely be less and if the reverse happens then it will increase. Therefore, the home loan repayment calculator works best for a fixed rate loan.
Also bear in mind that with a home loan repayment calculator, you are not considering any fees that may apply to a loan – and these can be considerable. There can be start-up fees, ongoing charges, and early termination charges, just to name a few. These may go by different names, so always check the fine print on your loan documents and know exactly what you are letting yourself in for before you sign anything.
At the end of the day, a home loan is a complex business that will involve many decisions and a lot of research for any Australian, no matter how experienced in financial matters. For someone just starting out it can be doubly challenging. A home loan repayment calculator is one tool you can have in the tool box that may help but it should only be used as a rough guide.
Are you searching for a home loan and are confused about what the best ones are? Maybe you’re not sure how to compare like for like because of the way different home loans are presented?
