Mortgage Rate Calculator

The loan-to-value (LTV) ratio is a critical factor in determining whether you need to pay private mortgage insurance (PMI). It is calculated by dividing the loan amount by the property value. If your LTV exceeds 80%, most lenders will require PMI to mitigate their risk. Lowering your LTV by making a larger down payment or paying down your principal faster can help you eliminate PMI sooner, reducing your overall loan cost. Additionally, a lower LTV may qualify you for better interest rates, as it signals lower risk to lenders.

Making extra repayments toward your mortgage principal can significantly reduce the total interest paid over the life of the loan and shorten your loan term. For example, adding even $100 per month to a $200,000 mortgage at 4% interest could save you thousands in interest and cut years off your repayment schedule. However, it’s essential to confirm with your lender that these extra repayments are applied directly to the principal and not future interest. Use the calculator to model how different extra repayment amounts and frequencies affect your payoff timeline and total cost.

An amortisation schedule breaks down each monthly repayment into its principal and interest components, showing how your loan balance decreases over time. Early in the loan term, a larger portion of your repayment goes toward interest, while later repayments contribute more to the principal. This schedule helps you visualise the long-term impact of your repayments and identify opportunities to save, such as making extra repayments to reduce interest costs or reaching milestones like PMI removal more quickly.

The interest rate determines how much you pay the lender for borrowing money. Even a small difference in rates can lead to substantial cost variations over a 15- or 30-year loan term. For instance, on a $300,000 loan, a 0.5% lower rate could save you tens of thousands in interest. It’s important to shop around for the best rate and consider the annual percentage rate (APR), which accounts for fees and other costs, to ensure you’re making a cost-effective choice.

A 15-year mortgage typically offers lower interest rates compared to a 30-year mortgage, which can save you a significant amount in total interest paid. Additionally, you’ll build equity in your home faster, as more of each repayment goes toward the principal. However, the trade-off is higher monthly repayments, which may strain your budget. It’s crucial to weigh the savings against your financial flexibility and ensure you maintain an emergency fund before committing to a shorter term.

PMI is typically removed when your loan-to-value (LTV) ratio reaches 80%, meaning your loan balance is 80% or less of your property’s original or current value. The calculator estimates the month PMI will be removed based on your regular repayments and any extra repayments you plan to make. To accelerate PMI removal, you can make additional repayments toward the principal or request a home appraisal if your property value has increased significantly. Keep in mind that some lenders may require you to formally request PMI cancellation once you reach the threshold.

When considering refinancing, evaluate factors such as the new interest rate, closing costs, and how long you plan to stay in the home. A lower rate can reduce your monthly repayments and total interest, but refinancing resets your amortisation schedule, potentially extending your loan term. Additionally, if your home’s value has increased, refinancing might eliminate PMI, even if rates haven’t dropped significantly. Use the calculator to compare your current loan with a potential refinance scenario to determine if the savings justify the costs.

One common misconception is that any extra repayment automatically reduces your principal. In reality, some lenders apply extra repayments to future interest unless explicitly directed otherwise. Another misconception is that small extra repayments don’t make a significant impact. Even modest amounts, applied consistently, can reduce your loan term and save thousands in interest. Finally, some borrowers believe they must make large lump-sum repayments to see benefits, but regular smaller contributions can also yield substantial savings over time.