Home loans overpayment calculator
Making the correct decision in home loans is very crucial in maintaining a favourable financial position. This reason is why, when purchasing a mortgage loan, it is very important to look into all the necessary information to make a sound and fair financial judgment.
One of the best ways to make the right decision is to do calculations. When it comes to mortgage deals, many mortgagees understand the advantages of overpayment; however, most of them ignore the helpful effect of using a mortgage overpayment calculator. Most of the time, they listen to other people’s opinions or let their emotions be the basis of their decision making. This is not to say that opinions of others must be entirely disregarded. It is true that these can be useful, but accurate information is still the better option.
To fully appreciate the benefits of such a mortgage calculator, a borrower should be aware of the advantages of prepaying a mortgage loan on their house. Overpayment is simply paying more than the agreed amount of monthly payment. Although it is generally beneficial, here’s a word of caution: Always be informed whether or not lenders /banks (e.g. Nationwide, Halifax) charge early repayment penalties.
Advantages of paying extra
Overpaying can save tens of thousands of pounds. Every borrower knows that the interest is the actual expense in a mortgage deal, and it can be a financial killer. If a bank allows overpayment towards the original balance, the outstanding capital decreases. As a result, the interest rate is applied to a much lower amount. Over the life of the mortgage loan, there is now a lower interest cost. A great way to see this effect is through using this site’s mortgage repayment calculator.
Another advantage of over paying is shortening the mortgage term. The amount of money that borrowers should be spending on the interest expense for the remaining life of the loan can be reinvested in more profitable ventures or can be added into their saving accounts.
Overpayment can also increase the equity in a real property. This is also known as avoiding negative equity or reducing the loan-to-value ratio. If a homeowner’s equity is high, he or she has more access to attractive mortgage loan deals when he or she decides to remortgage. The extra money can also serve as a financial contingency in case there are unanticipated expenditures.
The lending overpayment calculator
There are four basic pieces of information that a loan overpayment calculator requires—the principal amount of the loan, the mortgage term, the mortgage interest rate, and the overpayment amount. After entering these details, the calculator will then show the expected cash savings and the number of years expected to fully pay the loan.
Users must take note that the assumes certain factors. Some of these assumptions are as follows:
- Months have equal length. However, if a user only considers a monthly result, what varies will be the interest charged as some months have more number of days than the others.
- The mortgage rate is fixed.
- Penalties associated with early repayments are not considered.
- The amount of overpayment is assumed to be the same throughout the life of the mortgage loan.
On this page, we have a mortgage overpayment calculator that you can use. Just provide the required information, and you can have an accurate calculation in no time.