when you are in the market looking for a home loan or an investment mortgage. There are many different types of mortgage calculators but probably the most accessed by home loan borrowers is the mortgage calculator that works out how much you can borrower.
You do not need to feel daunted by a mortgage calculator – they are simple to use and will automatically estimate how much you can borrow. If you have a property in mind that you would like to purchase then these are the steps you need to take to ensure that the mortgage calculator gives you assistance in your property purchase decision.
Step One: Think of a purchase price that you believe is within your reach.
Step Two: Add approximately 5% to the price to cover off expected costs of the purchase.
Step Three: Calculate your expected savings. To keep your costs to a minimum it is best to try and put at least 20% towards the purchase price. This way you avoid the costly exercise of Lenders Mortgage Insurance (lenders will ensure against loss if you borrow more that 80% of the value of the property.)
Step Four: Subtract the 20% cash (or whatever equity you do have) from the purchase price.
This gives you your loan amount.
By making use of a mortgage calculator you now get an idea of whether you can afford the loan amount you require to purchase that dream home.
The mortgage calculator only needs minimal data.
Obviously the first thing you will be asked to input into the mortgage calculator is your income and the income of anyone else purchasing and borrowing with you.
The mortgage calculator will also ask for other income you might be earning such as overtime, second job, share dividends etc.
Once you have inputted all your income details into the mortgage calculator you will then be asked to input the monthly repayments you are making on any other loan as well as the credit card limit on all credit cards you hold. If you hold a number of credit cards you might find that when the mortgage calculator assesses your income, you are not able to borrow as much as you might have expected. In this case simply remove one or two of the credit cards you rarely use and work on the basis that you will cancel these credit cards before you apply for a loan. The mortgage calculator will show you how much difference fewer credit cards will make to your borrowing capacity.
This is all the data that is required by the mortgage calculator to work out how much you can borrow. If you an investor then when you use the mortgage calculator you will also include the gross rental income you expect to receive from the property you re buying. The mortgage calculator will automatically calculate between 70% and 80% of the gross rental figure and use this as additional income when working out how much you can borrow.
The mortgage calculator is a very useful tool especially when used in the early stages of the potential purchase process. The mortgage calculator immediately provides you with your purchase price range and you can go out and start looking for a property knowing that from a financial perspective you will qualify for a loan. You must remember though that other factors beyond the mortgage calculator figures are also involved in the loan approval process so it is best to speak with a mortgage broker to get his input and expertise.