Are you planning to take out a home loan to purchase a home or unit? Working out your budget, expenses, how much the bank will lend you and how much you can comfortably afford to pay back is the first step towards achieving this.
A great way to understand what you can afford to buy and repay is to use a home loan repayment calculator.
We might be biased, but we consider RateCity’s calculator to be one of the best home loan repayment calculators in the marketplace. Moreover it won’t just give you a low interest home loan, but the calculator also permits the comparison of the fees charged by a variety of lenders, based on the amount you plan to borrow. Plus it also allows you to place a real product into the calculator.
Simply key in the home loan amount, and the calculator will provide a monthly repayment figure from a number of different home loan lenders, as well as the ‘advertised’ and ‘comparison’ interest rates. The RateCity calculator will also reveal whether you’ll be up for an ‘application fee’ or not.
The advertised rate is simply the interest rate published by the lender, and doesn’t take into account additional fees and charges, which can catch out borrowers, particularly those with a first mortgage, if they’re not vigilant.
Comparison interest rate
Also commonly known as the ‘Annual Average Percentage Rate’ (AAPR), a comparison rate is the best way to estimate the costs of a home loan . This is because the comparison rate includes additional expenses such as ongoing monthly and annual fees, and any ‘establishment charges’. With the AAPR, these fees are pooled with the interest rate, and averaged over the life of the home loan.
To this extent, the AAPR provides a relatively more accurate interest rate and permits you to plan for your expenses and repayments more efficiently.
Establishment fees, also called ‘application fees’, are those charged by a lender when you apply for a new home loan. Typically, establishment fees cover the cost of creating your account and file, and for producing the documentation necessary for arranging your home loan.
Interestingly, not every lender charges establishment fees, and for those who do, the fees diverge significantly. So, if you choose to use RateCity’s home loan repayment calculator, it’s worth taking note of whether a lender charges establishment costs or not.