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Mortgage Affordability Calculator

When you make the decision to buy a home, you should use a mortgage affordability calculator to determine the optimal level of repayment. Buying a property is a long term financial commitment, so you need to strike a balance between affordability and minimising the amount of debt interest that you pay the lender. In order to use a mortgage repayment calculator, you need to enter the amount that you wish to borrow, the term of the loan and the rate of interest. You should then enter different combinations of figures into your mortgage affordability calculator to see how quickly you can realistically afford to pay off your home loan. Don't accept the maximum repayment term.

The lender will regularly select the maximum repayment term because it's easier for you to make the payments and far more profitable for them. A quick analysis of the figures with your mortgage affordability and repayment calculator will illustrate how much more you'll need to pay the lender over the life of the loan. It's a nice and easy way of determining whether you can make the payments, but it isn't optimal. The lender isn't under any obligation to save you money each month, they just have to make sure that you don't enter an arrangement that you weren't able to afford from the outset. Minimising your repayments will mean that they've done their job properly.

Debt Interest vs Affordability

If you get an £100,000 mortgage at 5% and enter a 25-year term into your calculator, you'll notice that the repayments are £591.27 per month. However, you'll pay a total of £75,377.01 interest over the course of the agreement. If you reduce the term to 20 years, you'll pay £668.68 per month and only £58,389.38 in cumulative debt interest. This means that you'll pay £77.41 extra each month, but save £16,987.63 over the life of the agreement. Reducing the term using a mortgage affordability calculator means that you're not only able to save a lot of money, it also means that you're able to pay off the loan 5 years sooner than would have otherwise been possible.

The problem is that not all first-time home buyers have enough disposable income to take advantage of the opportunity provided by a mortgage affordability calculator. If your mortgage loan affordability calculator offers a choice between easily making the payments and paying back the debt more quickly, you should always opt for being able to comfortably pay. This is because the consequences of defaulting on a secured loan are dire for the borrower. If you fail to make the payments, you could lose your home. The lender will let things pass for a few months, but at some point they're going to want you to start repaying any arrears that have accrued.

Use your mortgage affordability calculator to pay off your loan as quickly as you can, but being sure to leave yourself a bit of scope to meet the cost of any unwelcome surprises that may take place. If you can't meet the cost of an unsecured loan, this could cost you in a different way. Any missed and late payments will be reported to credit reference agencies and this has some negative implications for the cost of borrowing. When you come to refinance, you may find that you have to increase the term in order to be able to afford the repayments.

Calculator for Mortgage Affordability

The lender is obligated by the Financial Services Authority FSA to make sure that the customer can afford to make the repayments. It's no longer possible for a broker to manipulate the figures to create the illusion of affordability. You can use a free mortgage affordability calculator to enhance the likelihood of a successful application by ensuring that you select a term that doesn't compromise your ability to pay. It's the same mortgage calculator that the lender will use, so the figures won't suddenly change. If you apply using figures that stretch you financially, you're going to be declined. If you aren't going through a broker, this simple preparation will help you.

A mortgage affordability calculator tells you how long it'll take to pay off your loan if you're in a fixed-rate deal. If you're in a tracker loan, the repayments can and will change over the course of the agreement. This is because they follow the base rate that's set by the Bank of England. Just because rates have been stable for the last few years doesn't mean that they'll stay that way indefinitely. You'll regularly need to enter the new rate of interest into the mortgage affordability calculator to see how it affects how long it will take to repay the money that you've borrowed. You should also use your mortgage affordability calculator to determine how you'll be affected by rate changes.

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