What is a Mortgage? How to calculate Mortgage? Best Mortgage Calculator
Buying your own house may be the dream of everyone. But sometimes, affording a house or land can not be so easy. You need an adequate source of funding to make this dream possible. You don’t need to spend all your money on this. Other options are available to make sure you afford your dream with utmost ease. You can get a mortgage for a definite time and use the money to build your dream home.
Mortgages are a type of loan that a bank or housing society provides to buy the property you want. It is an agreement between the bank or housing society and an individual. The bank is called the mortgagee or the lender, and the individual is referred to as the mortgagor or the borrower.
The mortgagee lends the mortgagor a certain amount of money with interest against a property that the mortgagor owns. If the mortgagor fails to repay the money and the interest price, the ownership of the property against which the loan was made will be transferred to the mortgagee.
It is important to know the amount payable monthly in order to repay the Mortgage in proper order and avoid any penalty. This article will discuss how to calculate the Mortgage with interest and the best available calculators to help Calculate the Mortgage.
What Does Mean By Mortgage in the UK?
If buying a house in the UK is one of your goals, you must know the rules regarding Mortgages in the UK. This will help you borrow money as a mortgage for building your house and repay it within the specified time to avoid any penalty action.
Whether you are a citizen or a foreigner, according to the prevalent laws regarding Mortgage, you can enter into a mortgage agreement in the UK. The UK is considered one of the biggest markets for Mortgages. The country carries a number of 11.1 million mortgages worth nearly £1.3 trillion. This is why you can find many mortgagees in the UK.
The house you want to buy can be for any reason; it can be a business property, holiday home or residential house. You may buy a house for any purpose, but a mortgage is necessarily the best way to afford it.
How Mortgage works
The mortgage money is lent against the ownership of the property owned by the mortgagor, which is decided to be put into the agreement. So if the repayment of the mortgage money is not done within the time, the property goes into the mortgagee’s possession.
Usually, in the UK, the instalments, including the part of the principal money and interest associated with it, are paid monthly. The total payment term remains for 25 years, and in some cases, this may be higher or lower.
Who can get a mortgage in the UK?
There is no law relating to foreigners not being eligible for Mortgage, but there are certain criteria that decide the eligibility and the process of the Mortgage.
- For a UK citizen, the mortgagor must be an adult. If the mortgagor is too old, the bank or mortgage provider may require a higher deposit amount and a lesser time period to repay the amount.
- The bank or the mortgage provider may require proof of your income. This gives the mortgagee security about the mortgagor’s repaying ability.
- Credit history also plays a vital role in determining the mortgage amount. If you have a bad credit history, the banks and housing societies may not provide you with the mortgage amount.
- If you are a non-residence in the UK, the process of Mortgage may be a little complicated for you. You need to deposit 25% of the payment to get a self-certification mortgage, where no credit history is required.
- But if you have acquired a permanent job in the UK or have been registered as a resident for at least two years and have a bank account in the UK, the process may get easier.
How to Calculate Mortgage?
To calculate the total cost of the Mortgage, you need to consider the interest and various fees. The Mortgage is paid in monthly instalments for a period of 25 years. The whole payable amount gets divided into some monthly instalments with the part of the principal money and some specific interest.
- Various factors affect the monthly instalment of the Mortgage. These factors include the property’s value, the principal mortgage money, the rate of interest and the time period to pay the total money.
- To calculate the monthly payment amount, we need to calculate the total principal amount lent to the mortgagor.
- The rate of interest on the mortgage amount also plays a vital role in the calculation.
- The total months the bank requires the mortgagor to pay the complete amount is also used to calculate the monthly instalment.
- M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] , equation is used to calculate the total mortgage cost. Here the M refers to the total monthly instalment, P refers to the total amount of Mortgage, I refers to the monthly interest rate, and N refers to the total time duration of payment.
- This equation helps you to calculate the total monthly instalment required to pay.
- This doesn’t contain tax on the Mortgage, insurance amount or any other fees. You can add them later to decide the amount.
10 Best and Top-rated Mortgage Calculators In The UK
Calculating the Mortgage yourself can be a bit hectic. If you want to make it easy various online applications are provided to conduct the calculation and determine the payable amount with utmost accuracy. Although mortgage calculators only give you an estimation of the Mortgage you’ll be expected to pay; it is essential for proper planning. Here are some of the best UK mortgage calculators on the market.
Halifax Mortgage calculator
Halifax will be beneficial if you are a first-time home buyer, want to remortgage, or need a new mortgage. You’ll answer a few questions before your Mortgage is approximated. The questions include employment status, how much you earn per year, which the Mortgage is for, how many adults will be living in the house, outstanding loans, etc. It helps you calculate how much loan you may qualify to receive and what you’ll be expected to pay each month to service the loan. It is free, and you don’t need sophisticated IT skills to use it.
Tussle Mortgage Calculator
Designed to calculate UK mortgage, the Tussle Mortgage calculator is a basic but powerful mortgage calculator that’ll help you determine how much MortgageMortgage you can afford. It may also help you determine other fees related to the loan, such as broker fees. The good news is that you don’t pay to use this calculator.
Natwest Mortgage calculator
Are you looking for a mortgage for personal property, or would you like to get a loan for a rental property? Natwest mortgage calculator can help you determine an approximation of how much you could get, monthly payments, and other rates. And if you want to remortgage, it can help determine the necessary costs.
Yorkshire Building Society Mortgage Calculator
It features a borrowing calculator to determine how much loan you could receive and a repayment tool that helps you know how much you’ll pay per month. If you struggle with saving, the deposit tool may help you find out how much to save before paying the down payment on your mortgage. You may also find out the amount you can save on loan interests using the overpayment feature. This is one of the most versatile mortgage calculators out there.
Money Supermarket Mortgage Calculator
Are you in a place where you are planning for a new or existing mortgage? Money Supermarket tool may be what you were looking for. The base rate calculator feature helps you learn how central bank rates affect your mortgage. The stamp duty calculator feature helps you determine how much money you can save on stamp duty. And the loan amount calculator approximates the amount of loan you can afford. It has most features you’ll need to calculate your Mortgage and other related fees.
Forbes Uk Mortgage calculator
This is a simple but decent free mortgage calculator. It only has one feature to calculate monthly mortgage payments based on property price, down payment, interest rate, and loan length.
Habito Mortgage calculator
Although this is an essential tool, it can give you a rough estimate of how much you could borrow. It only calculates the loan amount; you’ll get a range of how much you may be able to borrow. Although it has limited features, it is powerful.
A mortgage calculator in the UK is a well-known tax and loan calculation platform in the UK. It determines the monthly instalment by calculating the interest rate, down payment, total loan amount and total term of repaying the loan. It also has the options to include property taxes, home insurance costs, mortgage insurance costs and other associated costs. It calculates the Mortgage with optimum accuracy and efficiency. The site is available 24/7 and easy to use.
Nerd wallet is a simple mortgage calculator that applies the common equation to calculate the mortgage amount. It not only provides a platform to calculate the Mortgage, but it also gives expert tips and chart diagrams to make understanding simpler.
UK Mortgage Calculator
UK Mortgage Calculator is a free application that provides tools to compare fixed rates side by side against variable-rate mortgages and interest-only home loans. UK Mortgage Calculator helps to calculate mortgages of various kinds. It performs various calculations easily and efficiently.
Type of Mortgage in the UK
The UK provides various kinds of Mortgages. Every specific type of Mortgage is provided for some specific purposes.
- Repayment mortgages are the most common type of Mortgage found in the UK. In these types of mortgages, the mortgagor pays some of the credited amount and interest in the motive to pay back the amount along with interest.
- After the payment of the specified money, the mortgagor regains possession of the property. Any person who wants to gain possession of his house can go for this Mortgage.
- If a person wants to make lower monthly instalment payments, he can choose for interest-only Mortgage. Here the mortgagor only needs to pay the interest amount monthly, and after the completion of the interest amount, he has to pay the total principal amount at once.
Cost of Mortgage
- The cost of the Mortgage and the rate of interest depends on various factors, like the amount of mortgage money taken, the actual value of the property and the mortgagee you choose.
- With a 2.48% interest rate, the average mortgage cost can be £723 on the house with an average value of £285,000 and £385,000.
- The Mortgage’s interest rate decides the amount you will pay each month for a period of nearly 25 years.
- The average interest rates for a mortgage in the UK are 1.68% at a 2-year fixed rate, 2% at a 3-year fixed rate, 2.04% at a 5-year fixed rate and 2.58% at a 10-year fixed rate. The more the amount of deposit is, the less interest it carries.
- The main mortgage amount is called the principal amount, and the interests are made up of that amount.
- The application fees are charged while applying to get mortgage benefits.
- Arrangement fees are associated with administration fees charged by the mortgagee to enter into the Mortgage. This fee can be from £200 to £2,000.
- A £100 non-refundable fee is taken with the name of the booking.
- The solicitor fees are charged as some percentage of the mortgage price. It is a legal fee that must be paid to set the agreement legally.
Mortgages are helpful to buy a house or land when you have no sufficient resources. Still, the non-payment of the Mortgage during the specified time duration can cause severe liability. Follow the article and make the best decisions for taking mortgages.