Are all mortgage calculators the same?

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June 26, 2011

Loan Market’s Lee Banh answers your burning questions about mortgage calculators.

Will using a mortgage calculator on two different sites yield the same results?
It should, as long as same variables are entered.

Do they all apply set formulas?
Most of them do. However some calculators may use net incomes instead of gross, so need to be careful what you enter.

What tips can you offer for those using a mortgage calculator?

  • Use a slightly higher rate (today’s rate + 1.5%) to see what repayments will be if rates go up and to make sure you can still afford your repayments.

  • Use 25 years as the loan term and compare the results with a 30-year loan term to see what is more comfortable for you, as all lenders offer these options.
  • Change the frequency to fortnightly and monthly to check repayments in line with your pay cycle.

Are there any risks involved?
Yes. If you enter the wrong variables you will either underestimate or, worse, overestimate your borrowing capacity.

Overall, are all mortgage calculators created equal?
The same formulas are used on the back end as almost all Australian lenders calculate interest on a daily basis and charge it a month in arrears. Lenders differ slightly in living expenses for adults and couples and children, and they also have different service loading rates. Almost all lenders have different calculators but they produce similar results.

To compare repayments and interest rates of real mortgage products, or compare home loans at RateCity.


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