A friend in Australia recently sought my advice about the usefulness or otherwise of a mortgage calculator. My friend was looking at refinancing her mortgage in Australia but was unsure as to the long-term benefits of such a move. She had heard about a mortgage calculator that could compare products and wanted to run her own scenario. We tracked down one mortgage calculator but this was a simple “how much can I borrow?” mortgage calculator which required you to input your salary and other liabilities or debts to work out your borrowing capacity. Age calculator The fact is that while such a mortgage calculator will give you an idea of how much you might borrow in Australia, other factors will be taken into account by the lender when assessing your loan.
Unfortunately a simple mortgage calculator has limited fields. In Australia, a lender will not just look at your debts and income but also the number dependants you have relying on that income, the time you have been in your current employment and enjoying the income, your savings history, and particularly your credit history. Although a mortgage calculator may have indicated a borrowing capacity of say $250,000 it is unlikely any lender in standard mortgages will advance funds if you have a poor credit history. One or possibly two explainable and minor defaults may not impact on the approval process but a number of defaults or judgements, or a single default on a large loan will definitely go against you. It is important that before you proceed with any refinance or purchase that you do speak with a lender or mortgage manager to check the parameters and whether you are in the ballpark for the loan amount you are after. There is a risk in relying on a simple mortgage calculator and expecting that a loan for this amount will be automatically approved.
Furthermore, the mortgage calculator did not factor in some important benefits she was enjoying, particularly a 100% offset loan feature which enabled her to reduce her monthly instalment significantly. By all means use a mortgage calculator as a guide but before committing to any fees or paying a deposit on a new purchase, check with a mortgage manager or other lender to make sure you and your mortgage calculator are on the right track. Before refinancing it is always a good idea to speak with your existing lender. Unless there is some event that has annoyed you and you have made the decision to leave because of the poor relationship you have with your existing lender, then discuss any concerns you might have with your existing lender – they will be willing to run through any mortgage calculator figures you want clarified and will be generally keen to retain your business.