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Three reasons a home loan calculator can help you land your dream house

Three reasons a home loan calculator can help you land your dream house

Most Australian borrowers will use a mortgage calculator at some point on their buying journey. Whether it’s to work out how much you can afford to borrow, or how much the repayments would cost for different home loan interest rates, a home loan calculator may be able to help you get into the property you want, sooner.

A home loan calculator tells you where you stand

They say that knowledge is power, and that time is money. Having a clear idea of the state of your finances can give you a realistic idea of what kind of loans you can apply for and what types of property you can afford. This can help you avoid the frustration and disappointment of setting your expectations too high, and help minimise the risk of ending up in mortgage stress.

Even if you’re not in a perfect position to buy your dream house at present, you can still play the long game. Using a mortgage calculator to find what you can comfortably afford, you may be able to purchase a starter home or investment property, build your equity over time, and refinance or sell later on when you’re in a better position.

If a calculator tells you that you could likely afford a home loan’s repayments, but you are struggling to save the deposit that could let you avoid LMI, you may be able to look into guarantor home loan options. By getting a parent or other family member to guarantee your loan, you can buy a home sooner with low or no deposit, and look into refinancing further down the track.

A home loan calculator can help you find a new bank or mortgage lender

If you were simply planning to go to your current bank an ask for a home loan, you may be missing out on a wide variety of other options. It’s important to compare home loans offered by different banks and mortgage lenders, as there may be an options out there that would better suit your financial situation that you hadn’t yet considered.

Some home loan calculators are linked to comparison engines, where the information you use to estimate your home loan repayments or borrowing amount can be used to search for compatible home loans. As well as looking at home loans from the big banks like Westpac or ANZ, you may be surprised to find that mortgage offers from banks like Suncorp or UBank, or non-bank lenders like Athena, may also offer the interest rates, fees, features and benefits you’ve been looking for.

With the right home loan from the right lender, you may be able to put yourself in position to buy the right property. 

Home loan calculators don’t calculate just one thing

A good home loan calculator can be used in more ways than one, giving you options for comparing home loan offers and working out the best options for your financial situation.

A home loan calculator can help you estimate the repayments on a mortgage offer, given the loan amount, interest rate, and loan term. This can help you work out if a particular mortgage deal may be affordable for you, or if you’ll have extra room left over in your household budget.

A home loan calculator can also be used to estimate your borrowing power, based on the mortgage payments that you can comfortably afford. You may be able to enter you income and expenses to estimate how much could be comfortably added to your household budget. Alternatively, you could start by entering how much you want to pay for your home loan from month to month, and from there estimate how much you’d be able to borrow, given a mortgage with a particular interest rate.

This information can all be used to get a better idea of what to expect when you apply for a home loan or contact a mortgage broker. By knowing your financial situation and personal goals, you can look for a mortgage that matches what you need to buy the home of your dreams.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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