Buying a home is a major financial undertaking and can be more overwhelming than you initially thought.
If you’re a first time home buyer, you’ll likely to need all the help you can get. Here’s one handy tool to help you:
Use a Home Loan Calculator
You’ll need to determine your total costs. That’s the only way you can better plan for your budget. A mortgage calculator will come in handy in this case.
Benefits of a Mortgage Calculator
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You don’t have to be a financial whiz to buy a home. Buy you do need to stay on top of the money and payments. Your budget is going to matter a lot. Think of it as your guide.
With a guide, it’s easy to remember what your next payment deadlines are, or how much you can afford to splurge on that new shoes. Want to know if you can afford a vacation or not?
Then you need to know how much you can adjust in your budget in order to squeeze that out. That’s where the calculator can help.
Here’s how you can use a mortgage calculator to your absolute advantage.
- The interest you have to pay for – Using the calculator lets you know if paying for a higher monthly interest rate can work for your budget or if you have no other choice but to go with one that allows for a smaller monthly interest on your payment, but one where you end up shelling out more money to pay for the interest in the long run.
- To see which mortgage works is ideal – There are a lot of mortgage schemes available in the market. Use the calculator to help you find the best kind, one that works for your budget and needs. From interest rates, package inclusions and more, you’re sure to find the home loan deal that works for you.
- To see if you should refinance or not – Refinancing can be a good move, if it’s the right one. With Singapore’s rising interest rates, though, MSN believes refinancing can help in alleviating loan expenses. Since it only makes sense to refinance your loan if you’re going to get bigger cost-savings out of it, make sure you do your research. Interest rates matter but be sure to check for other hidden fees, conditions that might apply and loan features or package inclusions, if there are any.
- Determine your monthly payments – Knowing how much of your income will be tied down for months, for years, helps you put things in perspective, from a financial point of view. It especially helps you figure out how much you can afford. If you have some leeway in your budget—say, you leave a certain amount of your monthly income for shopping emergencies or miscellaneous expenses—you might need to adjust those expenses too. PropertyGuru Singapore offers a housing loan calculator you can use to calculate your monthly mortgage payments so you can keep a better eye on your finances.
Types of Calculators
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Aside from home loan calculators, you can also look forward to using other types of calculators:
- Mortgage repayment– Need to know how much your home loan repayments will cause you every month? Take the guesswork out of it by using a calculator instead.
- Mortgage refinancing– identify the risks and rewards of going for a refinancing scheme
- Total Debt servicing ratio calculator – know how much of your gross income can you afford to spend on a mortgage if you want to invest in some private property
- Mortgage Servicing Ratio– Have your eye on an HDB property? Want to know if you have enough for an Executive condo unit? Use this calculator to find out.
- Stamp Duty– Buying another property? Before you pick up another property, figure out how much the stamp duty is going to cost you this time.
- Interest only– Curious about how much an interest-only payment plan can work out for you? Find out with this tool.
Aside from calculators, here are a few other things that help you determine your home loan rates:
Your Credit Score
Banks and lending companies offer interest rates based on your risk profile. That means the bigger risk you are, the higher the interest. So if you don’t want to get charged with astronomical rates, do your best to have a clean, good credit history and score.
If you do, your home loan rates should be ideal. That works the other way around too. If you’ve got a lousy profile and credit score, you’ll either get charged with interest rates higher than the norm—or not get approved at all.
Your Home Loan Terms
A shorter home loan term should net you less interest rates overall. But that also means you’ll have to pay for higher interest rates every month of your loan term. If your budget can cover the costs, though, then go ahead.
Though money might be a bit tight during the first few years, things will turn right back around and you can look forward to bigger cost-savings in the long run.
Getting Mortgage Insurance
Mortgage insurance reduces the amount of risk banks have to deal with since it covers your outstanding loan debts in the case of your death or if an accident happens and results into a permanent, life-long disability for you.
However, that means you’ll have to shoulder both—insurance premiums along with your monthly mortgage—on top of all your monthly bills.
The U.S. Federal Reserve
Once rates start to rise in the U.S., it’s going to affect home loan interests here as well, says Business Asia One, along with other places around the globe.
It’s expected to cause a lot of home owners to go in a mad scramble to lock in the best home loan packages with lower interest rates. This way, they can effectively reduce interest spending before the rates go on a major price hike.
All in all, these, along with the different calculators, should give you a pretty good idea of how much you’ll need to have in order to own a home.
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