Thinking about a home loan and not sure how much you can borrow? A mortgage calculator can be a good first step.

When you use our mortgage calculator, you’ll be asked to enter the following details:

  • Your annual income (and if you have a partner, their income)
  • The number of dependents you have e.g. children
  • An estimate of your annual expenses
  • Your monthly credit card repayment, car loan repayment and any other payments
  • The interest rate you’re expecting to pay for the duration of the loan
  • The loan term – i.e. the duration of the loan.

With these details, the mortgage calculator will estimate the maximum amount you could borrow and the applicable monthly repayments.

The mortgage calculator will often display a graph to visually show you how your loan balance decreases over the term of your loan and also includes a breakdown of the principal and interest components of your loan.

credit savvy mortgage calculator
Example of results from Credit Savvy’s mortgage calculator

However, there are a few important things to keep in mind when using a mortgage calculator:

Interest rates can change

Even though many mortgage calculators have an interest rate buffer built in to the calculations, when you’re asked to enter an interest rate, make sure you consider what would happen if the interest rate goes up significantly. Interest rates in Australia have been relatively low the past few years but when you’re considering a loan term of 25 or 30 years, a lot can change. Make sure you’ll be able to service your loan repayments even if the interest rate goes up or your circumstances change.

Consider fees and other costs

A mortgage calculator is usually unable to take into account the fees and extra costs involved when taking out a mortgage. For example, you may have an application fee associated with your home loan, or a settlement processing fee to process the settlement of your loan. You could also have ongoing fees such as an annual package fee, so it’s important to check the terms and conditions before taking out a particular home loan. Mortgage calculators often do not include Lenders Mortgage Insurance (LMI), which is typically paid on loans where the deposit is less than 20% of the property purchase price.

Mortgage calculators also don’t take into account fees associated with purchasing a home. Examples of such fees include (but are not limited to) stamp duty, inspection fees and legal fees. It’s a good idea to familiarise yourself with typical upfront costs of buying a home.

Other features

While the amount you can borrow and the interest rate are important factors when choosing a home loan, don’t underestimate the other features that a home loan can offer. Examples of such features include the option to make extra repayments over the life of the loan, the ability to redraw any extra funds you have deposited and the option of having a 100% offset account.

It is only an estimate

A mortgage calculator is a great starting point in your home loan search but it is important to remember that the results are only an indication of your borrowing capacity and potential repayments. Each provider might have a different way of calculating what they are prepared to lend you and of course different products and interest rates that may impact this.

At Credit Savvy we always recommend doing as much research into products and providers as you can and to always read the product guides before making any decisions.

Why not get started today and try out the Credit Savvy mortgage calculator now?

Author

2 Comments

  1. Good day,

    I got an OKay credit score due to credit applications that had been denied (with only 1 existing personal loan that i regularly pay). My husband and i have plans of applying for a housing loan, will my score also affect my chance of being granted for a housing loan??

    • Credit Savvy Reply

      Hi D,

      Thanks for getting in touch and for being a Credit Savvy member.

      Unfortunately we aren’t able to provide personalised financial advice, which includes speculation as to what would happen to your score from certain actions – but we can help you check your credit worthiness, so you know where you stand.

      When it comes to applying for loans and credit products, every credit provider has their own loan application assessment criteria. Consistent monitoring and review of your score will help you gain a better understanding your credit worthiness, however it is important to note that a lender may use more than just your score to assess your application.

      To help you interpret what your score means and how scores are calculated, please refer to the FAQ section on our website.
      There is also some further information in the following articles that you may find useful:
      How are credit scores calculated
      How to improve your credit score

      Kind Regards
      The Credit Savvy Team

Leave a Reply