From our calculator's Instructions and Tips

February 16, 2022 by Pietro

Buying a house can be exciting and overwhelming at the same time. 

There are many aspects and variables you need to consider when you decide to make the big step.  Some aspects are related to personal and emotional circumstance. Other are strictly financial calculations and costs considerations.

Fortunately you are not alone in this journey. In the following articles you can find a lot of helpful information and guidance, as well as the best tool on the web to get all your calculations right.

The calculator: who is it for? 

The mortgage calculator was designed to assist anyone who is looking to analyse a mortgage. 

It is particularly indicated to:

  • Assist potential home buyers approaching the banks for a new loan 
  • Compare different loan offers
  • Test the affordability of a property
  • Control the costs and efficiency of an existing mortgage
  • Consider the consequences of interest rate changes
  • Study the effects of voluntary extra repayments
  • Examine the cost/benefit of refinancing a mortgage

Why is it important to be prepared before you talk to your bank?

Being prepared and knowing what to expect in terms of monthly repayments, interests and costs will give you confidence when you will face your bank to negotiate a mortgage.

It shows that you have some familiarity with mortgage calculations and that you have done some background work. 

You will feel confident in asking more detailed questions and in selecting the best offer for you. 

Why is our calculator the best?

Thanks to a very easy and intuitive interface, you can start immediately with the calculations. 

The graphs provide useful insights in a simple and intuitive way.

A Comparison Table allows you to easily compare different loan offers at once.

When you are familiar with the basic functionalities of the calculator, you can start exploring the More Options menu. Here you can:

  • Include additional variables to your calculation
  • Study the benefits of making voluntary extra repayments
  • Consider what happens if the interest rate changes

Thanks to the Export features, you can download the amortization schedule and edit it on Excel.

You can also export to Excel you loan Comparison Table for your personal notes. 


How to enter your mortgage data in the calculator

Once you are on the calculator’s page, insert your data in the pink table ‘Enter your Loan Inputs’. Below is a guide on how to fill each field of the form.

‘Loan Description’ – For instance, this may be the name of the bank and the name of the loan package offered to you.  This name will show up in your Loan Comparison Table and will help you identify each calculation. 

‘Currency’ – Select your currency from the available currencies.

‘Property Price’ – This is the cost of the property you are buying. Typically this includes any real estate commission fees.

‘Deposit’ – The loan deposit (or down payment) is your contribution to the purchase price of the property you wish to buy. Paying a deposit means that you own a small portion of the house and it shows good will to honour the home loan agreement.

A bigger home deposit means not having to borrow as much money. It also means paying less interests over the life of your home loan, paying lower monthly repayments and/or paying off your loan sooner. 

By using the calculator you can quickly test how changing the amount of the deposit affects the monthly repayments, interests and the amortization of the mortgage. It shows the importance of having a suitable amount of savings before entering a mortgage. 

Usually, 20% of the full value of the house is a good amount to aim for as a deposit. Buyers with less than a 20% deposit are often required to pay lenders mortgage insurance, which is an additional cost.

‘Loan Amount’ – This is equal to the Property Price (and any Initial Costs where specified), minus the Deposit. The loan amount is therefore how much you are actually borrowing from the bank or financial institution.

‘Loan Term’ - Try adjusting the term and notice how the graphs of the monthly repayments change.

‘Interest Rate’ – Ultimately this is given by your bank. Usually you can get the rates applied by your bank on its websites.

‘More Options - Initial Costs’ 

In this entry you can include any one-off costs applicable to your loan. One-off costs can relate to the origination and underwriting of a home loan, real estate commissions, taxes, and insurance premiums, title and record filings. 

In summary, possible one-off costs are: 

  • Stamp duty, 
  • Government charges, 
  • Loan application fee, 
  • Mortgage registration fees, 
  • Property valuation fees, 
  • Conveyancing fees 
  • Lenders mortgage insurance. 

If you have a separate budged allocated for paying commissions, taxes and duties, then you don’t need to include them in your loan.    

‘More Options - Monthly Costs’

In this entry you can include any recurring costs that you wish to add to your calculation. These monthly costs will not affect the Loan Amount and its interests, but they will be added to the Minimum Monthly Repayment. 

If the bank (or other financial institution that is offering you the loan) is going to charge you monthly fees for keeping an account with them, then you should definitely consider these fees as a recurring cost of your loan and add them to Monthly Costs. 

Similarly, if the bank includes a compulsory insurance in their loan package, then you may want to include the insurance monthly premium in Monthly Costs. 

In summary, possible recurring (monthly) costs are: 

  • Bank account fees
  • Insurance premiums 

If you are using the calculator to test the affordability of a loan, then you can also include the average monthly costs of: 

  • Real property taxes 
  • Homeowner's association fees 
  • Utility bills 
  • Maintenance costs 
  • Any other recurring cost you wish to include in your monthly expenses. 

This way you will have a full picture of how much your total monthly expenses will be and you can plan ahead your personal finances.

‘More Options - What if I make monthly extra repayments?’

This option allows you to analyse the scenario where you wish to make extra monthly repayments on top of the Minimum Monthly Repayment, for a number of years. 

You can choose the period of time during which you will be making extra repayments. Simply select the fields From Begin of Year and To End of Year.

By using this option you will notice how the duration of the loan will shorten, as well as the total interest paid at the end of the loan. You will be surprised how little extra monthly repayments can make such a big difference in the long run!

‘More Options - What if I make a lump sum repayment?’

You might anticipate that at some point you will have extra funds available to repay part of your home loan. The funds might come from selling another property, accessing your retirement savings, cashing out an investment or receiving an inheritance. You can use the option What if I make a lump sum repayment to analyse the effect on the loan. Note how, after a lump repayment, the duration of the loan will decrease, as well as the overall interest paid. You can observe how making the lump payment at early stage has much bigger impact then if you make the same lump payment toward the end of the loan. 

After you tested the effect of a lump repayment, you won’t let your savings sitting on another account! Instead you may want to ask your bank for options to use your savings against the interests of your home loan.

‘More Options - What if the interest rate changes?’

The assumption that the interest rate won’t change for the entire life of a mortgage is simply not realistic. Even when banks offer fixed rates, this is usually for a limited number of years, after which the loan falls back into a variable rate. Moreover, banks mitigate their risk by offering fixed interest rates which are higher than the current variable interest rate. 

The yearly rate can change for a number of reasons. It might change as a result of market economy fluctuations, or a change in personal circumstances. For instance your credit score might have improved and you might be eligible for a lower interest rate. Or the property you bought might no longer be your primary place of residence, thus no longer eligible for a discounted rate. 

Fortunately the Mortgage Calculator Online allows you to see what would happen if the interest rate changes. It does so by recalculating the minimum monthly repayments and showing the effects on interest paid with charts and tables of repayments.