Calculating Your Mortgage

JonSimon Estate and Letting Agent

Getting a mortgage is a big but necessary step to becoming a homeowner, and finding the right loan for you is an important choice you’ll have to make. Given its significance, it’s important to know why mortgage calculations matter. We understand that when it comes to mortgages, people are often left feeling overwhelmed with the options they have as well as when trying to understand what it all means. That’s why we’ve created this helpful overview that includes everything you need to know about mortgage calculations. This includes why they matter, how the calculation to find out your monthly payments is made, and how JonSimon can help you when it comes to mortgages.

 

Affordability & Your Future – Why Mortgage Calculations Matter 

Mortgage calculations are key to understanding the numbers behind your home loan and what that means for your future and your mortgage repayments. Whilst types of mortgages, lenders, interest rates and other property-specific terms might often seem tricky to understand and get to grips with, it’s important to get prepared and informed when it comes to your calculating your mortgage and the payments you’ll make.

 

Selecting the right type of mortgage can often feel like an overwhelming task. Yet, having a rough idea of how much you can borrow will help you to be prepared and organised, making the task of finding the right loan type for you much simpler. By having this rough idea, you’ll feel a lot more confident when it comes to selecting the right option for you, as you’ll understand what your offers and options mean for you and your future repayments too. Understanding what any loan means for you, your future and your finances is key to finding the right one too. Ultimately, carrying out and understanding a mortgage calculation will help you to make better financial decisions.

 

How To Calculate Your Mortgage

Calculating your mortgage has never been easier thanks to the many online mortgage calculators that are available. Whilst these are useful in helping you to do the calculations for what you can afford, and what your monthly mortgage payment may be, it’s still important to understand what these figures mean and how a calculator will estimate the cost of your mortgage. 

 

To calculate your mortgage, you’ll need to use the price of the property and the available deposit in your calculations. If you haven’t yet seen a property you’d like to buy and are just looking for a rough estimation, work with your budget instead to make these calculations. Besides these factors, interest rates, mortgage terms and your repayment options will also affect your monthly mortgage payments.

 

Mortgage Interest Rates

Mortgage interest rates are an important part of a mortgage payment calculation, and are definitely something to consider when deciding on the best option out there for you. The monthly interest rate refers to an additional cost that you must pay to your mortgage lender, on top of the amount that you have borrowed from them. In other words, it’s an additional charge from your lender for letting you borrow its money to purchase the property.

 

Interest rates are affected by various factors such as the stock market, foreign markets, inflation rates and employment levels. However, there are things you can do to improve your chances of getting the best mortgage interest rate. These include saving a bigger deposit, getting a good credit score, using a mortgage broker and, of course, shopping around for the best deal. For the latter, using price comparison sites to compare mortgage interest rates is always a good idea. However, as with the rest of the factors that will be discussed, remember to consider the entire cost of the mortgage across the term, and not just one part of it. 

 

There are different types of interest rates, or mortgage rates, available. Having an understanding of these will help you to find the right loan for you. 

 

  • A fixed-rate mortgage is when you can get your interest rate fixed during the initial mortgage period. Despite a change in external factors that can influence an interest rate, it means that your rate will stay the same for a period of time (usually two or five years).
  • An adjustable rate mortgage (or a variable rate or a Standard Variable Rate (SVR) as it is also known as) is subject to change based on the Bank of England base rate and the lender’s analysis of the market and their competition. Mortgages after their initial period are on this type of rate but you can, however, get a discounted variable rate for your initial fixed period.
  • A tracker rate is dependent on the Bank of England base rate. The mortgage lender’s base rate charge is added to the base rate of the Bank of England. As a result, when the Bank of England base rate goes up and down, so will the tracker rate.
  • Here in the UK, the Bank of England set the charge for banks when it comes to lending and savings. This base rate will fluctuate depending on the housing market and the wider economy, as well as other factors. When this base rate goes up or down, so will the SVR of the lender.

 

Mortgage Terms

A mortgage term, or a loan term, refers to the length of time in which your mortgage must be repaid to the lender, which inevitably affects your mortgage calculations and the monthly payments you will make. When it comes to deciding on a longer or shorter mortgage term, preferences will differ person-to-person, depending on circumstances such as your budget and your age. For instance, based on your circumstances, you might find a 30-year mortgage to be more beneficial, whereas others might prefer 15-year mortgages to complete their mortgage payments. In the event of remortgaging, you can choose to change your term. However, keeping a mortgage loan term the same will avoid having to pay any additional interest.

Repayments

There are different repayment options available, all of which affect your monthly payments. It’s important to note that a mortgage is usually considered in two parts: there’s the capital which is the money you borrow, and the interest, which the lender charges for the amount you borrow and owe. If you choose a repayment mortgage, you’ll repay the capital and the interest together. However, if you select an interest-only mortgage, you pay back the interest monthly and then, at the end of the term, you’ll repay the capital you owe.

 

Key Considerations With Mortgages – Calculating How Much House You Can Afford

Lenders will take a range of factors into consideration when deciding how much you can borrow. To calculate the monthly repayments you can afford and how much you can borrow, lenders will conduct an affordability assessment that takes into account your monthly income and the cost of any personal and living expenses such as bills and credit card payments. The lender will also consider your ability to make repayments in the future. To do so, the lender will look at the possible effects on interest rates and changes to your lifestyle, such as redundancy.

 

Whilst lenders will calculate this for you, you should still calculate this yourself prior to your discussions about loans with them – this ensures you know what to expect and it can also help to inform your property budget too. To calculate how much money you can borrow from a lender, you’ll need to know how many people are applying for the loan, your yearly income (before tax), an estimation of any regular spending (such as overdrafts, other loans, and your pension) and any guaranteed bonuses or overtime payments you’ll receive in the year. The lender will limit the loan-to-income ratio at four and a half times your income, so you can use this ratio to estimate how much you can borrow.

 

It’s also important to take into consideration the further additional costs you’ll pay on top of the purchase price of a property, such as taxes or insurance to protect your home contents and belongings. If you’re interested in purchasing insurance, the team at JonSimon would be happy to discuss your options –  our team can cut through the jargon and help you to decide the best option for you. Considering these additional costs as well as your mortgage will help you to decide the best option for you, so you can ensure you’re able to afford all outgoings in the future.

 

How JonSimon Estate Agents Can Help

We understand that taking all the necessary steps to owning a house can be quite daunting and overwhelming at times, but we are committed to helping our customers every step of the way by providing trusted, expert advice regarding buying a house. Getting a mortgage and buying a home of your own is a milestone in life and should be an enjoyable experience, and here at JonSimon that’s exactly what we deliver for future homeowners. From the first enquiry you make, to picking up the keys to your new property, we want to make your journey to becoming a homeowner uncomplicated and stress-free. That’s just one of the many reasons we have such a fantastic reputation that brings customers to us again and again.

 

Our estate agents are always happy to help customers with a range of enquiries, whether that involves discussing a property for sale with JonSimon or pointing them in the right direction to seek mortgage advice from a qualified broker. Even if you aren’t quite ready to commit to buying a property just yet, a member of our team would be happy to discuss your options, offer friendly advice or simply help you to understand what mortgages are.

 

Get In Touch

If you’re interested in taking the exciting step of getting a mortgage and making a home your own, get in touch with our teams in Radcliffe, Ramsbottom or Burnley today to discuss our relevant services and options for helping you to achieve your property goals.

Meet The Team

Dramatically reinvent market-driven relationships vis-a-vis customer directed e-business. Monotonectally incentivize distributed e-markets through high standards in.

Simon Morris

BA (hons) PGCE, MARLA, MNAEA

Company Director

Jonathan Morris

MNAEA

Company Director

Ryan Dillon

Lettings

Michael Greenhalgh

Company Director

Andrew Collins

Sales

Gareth Dooley

MNAEA

Company Director

John W Dinsdale

FRICS

Consultant/Charted Surveyor

Laura Stockdale

Lettings

Leanne Gill

Sales/lettings

Joanne Scott

Property Manager

Carmine Sodano

Sales

Frankie Garvey

Sales

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