A mortgage is a specific loan where you use real estate property as collateral. It is needless to say that if you take a mortgage loan, then you have to repay it back within a fixed time span. If not, then you will end up losing your property.
However, you must know how much you need to pay in order to completely return back the amount you have borrowed from the lender. Therefore, it is important to carefully calculate your mortgage repayment. There is various information that you should know in order to calculate your mortgage repayments.
The amount of your mortgage repayment will depend on whether you are a first-time buyer or just remortgaging. If you are in need of calculating your mortgage payments, then you can go through the following sections for detailed information.
What to Know Before Using a Mortgage Repayment Calculator?
Before you start to calculate the monthly mortgage repayments, you have to know about the following:
- The amount of money that you wish to borrow in the form of mortgage loan
- Your mortgage term
- The interest rate that your lender or borrower has fixed.
However, you must know that you can use the mortgage repayment calculator as an interest-only mortgage calculator. But, in case you are a first-time borrower, then you won’t get an interest-only loan. If you are not sure about the interest rate of your mortgage loan, then it is important to contact your lender.
Moreover, you should know that the duration of your mortgage term greatly impacts the monthly mortgage repayment. If you have a mortgage loan that allows 35 or 40 years of loan-term, then your monthly repayment cost will be quite less. However, in that case, you will have to pay more interest.
On the contrary, a mortgage loan with a shorter loan-term will have more monthly repayment amount.
Different Types of Mortgage Repayments Calculator UK
You can use two methods for repaying back your mortgage. These are interest-only mortgages and repayment. If you are taking a mortgage loan for the first time, then you might not get an interest-only mortgage loan. This is because to qualify for this type of mortgage repayment calculator UK, you need to have an alternative property. In other words, you must own a significant property apart from your house to convince the bank that you are eligible for this type of mortgage.
In case of a mortgage repayment calculator UK, you have to repay a part of the principal mortgage debt each month. The principal mortgage debt is the actual amount that you draw from your borrower or creditor. The mortgage term in the UK is usually 25 to 30 years on average. In repayment mortgage, with the end of the mortgage term, you can usually repay back the entire loan amount.
When you repay back the full amount by the end of the mortgage term, you would be able to get your house out of the mortgage.
In the case of an interest-only mortgage, you will be repaying only the interest amount that is levied on your principal mortgage debt. In other words, the amount of your mortgage repayment will be lower. However, you will not be able to own back the property at the end of the mortgage term.
Although the monthly repayment amount is less, you will end up paying more in the long run. This is because you would be paying an amount in interest each month. So, an interest-only mortgage is usually more expensive. After you repay the interest amount, you will have to pay back the mortgage in a lump sum.
If you own more than one property in the UK, then you can be eligible for the buy-to-let mortgage plan. However, it is important to note that these buy-to-let mortgages are actually interest-only mortgage loans. This means that your monthly mortgage repayment will be quite lower as you’d only have to pay the monthly interest rate.
However, you have to repay the principal debt when you are done with paying the interest amount. To repay this lump sum amount of mortgage loan, you would require to sell off one of your alternative properties. Alternatively, you can also use other repayment methods like inheritance or investments to pay off the principal mortgage debt.
You should use a mortgage loan repayment calculator in order to find out the amount that you should pay each month for an interest-only mortgage. Also, you can calculate the total amount that you will need to pay for clearing a mortgage debt entirely.
About Student Loan Repayment Calculator
If you are a university student who has taken a student loan to facilitate higher studies, then you’ve to take the loan just like a mortgage. In case of a student loan, you’ll need to pay the borrowed amount back only after you have completed your degree.
The repayment of student loans depends on various factors. However, you can always use various online student loan repayment calculators to find out how much you need to pay off. The final amount that you should pay back to remove your student loan depends on the following factors:
- The salary that you get from your job
- The current inflation rate in the UK.
- Holidays or leaves that you take from your job every year.
Usually, an interest rate of 3% is applied to student loans. However, after that, the interest rate of your student loan will vary on how much your annual salary is. There is a particular threshold beneath which the interest rate will be the same as the rate of inflation. For the 2019-2020 academic session, this threshold would be £26,575.
However, there is also a threshold above which the interest rate will be 3% more than the inflation rate. The upper threshold for the 2019-2020 academic session will be £47,835. Inflation in the UK will also be a major factor that will be used during the calculation of student loan repayments.
Monthly Mortgage Repayment Calculator
There are various online mortgage repayment calculator UK options available on the internet. You can easily use these tools to smartly calculate your mortgage repayments option. All you need to do is to find out the relevant information about your mortgage debt and then provide them in the calculator. The online calculators will use a pattern to let you know how much you’ve to pay monthly.
Using a loan repayment calculator UK will allow you to manage all your finances effortlessly. You will know how much you need to spend or save to repay your debt without any hassle. Here we have presented a table. With this table, you can get an idea about how much you have to pay monthly. To prepare the table, we have taken a two-years fixed mortgage.
Note: The loan-to-value ratio for most first-time mortgage borrowers in the UK is about 85%. So, the LTV value that we have considered for creating this table is 85%.
|Mortgage amount (in £)||Interest Rate||Term||Monthly Payment (in £)|
This is merely a rough table that you have produced with generalized and assumed data. To get the exact amount of the monthly mortgage repayment value, you need to provide authentic data in your loan calculator.
Brief Idea About Mortgage Payment Insurance
Sometimes, it might happen that you are unable to pay the monthly mortgage repayments. Sickness, unemployment, or some major accidents and deaths can cause an unwanted financial burden. As a result, you may not be financially strong enough to keep paying the monthly instalments.
In such situations, you may take the help of the Mortgage Payment Protection Insurance or MPPI. The Mortage Payment Protection Payment of the UK is capable of covering your mortgage for up to two years.
However, there are various types of MPPI in the UK. So, you must make sure to approach a financial advisor to seek the best advice. You must be careful while choosing the best MPPI plan so that you can get the best cover that you need.
If there is a possibility of long term unemployment, then you can go for the Income Protection Insurance. This will allow you to cover much of your mortgage payment. Mortgage Life Insurance is the type of insurance that may clear all your mortgage debt in case you pass away suddenly.
To sum up, it is crucial to systematically repay back the mortgage loan. Clearing the mortgage debt within the stipulated time span will ensure that your real estate and other property is intact. Moreover, not clearing the mortgage debt can also lead to a bad credit score. A low credit score can get you into many financial difficulties in the future By Financial Advisor.
So, to be sure how much you must pay each month to clear your mortgage debt, you must use a mortgage repayment calculator UK.