Mortgage Calculator

What's a Mortgage?

Think of a mortgage as a massive loan that's backed by the house you're buying. Basically, you put down some cash upfront (that's your deposit or down payment), and the bank lends you the rest. The clever bit is that the house itself acts as security - so if you can't pay, the bank can take the house back. It's not exactly a fun thought, but that's why they're willing to lend you hundreds of thousands.

Here's the thing most people don't realise: you're not just paying back what you borrowed. You're also paying interest, which is essentially the bank's fee for lending you all that money. Over 25-30 years, that interest can add up to be almost as much as the original loan amount. Mad, right?

The Key Bits You Need to Know

• Principal: The actual amount you borrowed (not including interest)
• Interest: What the bank charges you for the privilege of borrowing their money
• Property Tax: Your local council's annual cut based on your property value
• Insurance: Protects both you and the lender if something goes wrong
• PMI: Extra insurance you'll pay if your deposit is less than 20%

Why Your Deposit Matters So Much

Here's where it gets interesting. The more you put down upfront, the less you borrow, which means lower monthly payments and way less interest over time. Put down 20% or more and you'll skip PMI entirely - that's money back in your pocket every month.

But don't stress if you can't manage 20%. Plenty of first-time buyer schemes let you put down as little as 3-5%. You'll pay a bit more monthly, but sometimes it's better to get on the property ladder sooner rather than waiting years to save up that perfect deposit.

Different Types of Interest Rates

You've got choices here, and they matter more than you might think:

• Fixed Rate: Your rate stays the same for the whole loan. Predictable, but you might miss out if rates drop
• Variable/ARM: Rate goes up and down with the market. Can save money if rates fall, but risky if they climb
• Interest-Only: You only pay interest for a few years, then start paying the actual loan. Lower payments initially, but watch out for that payment jump
• Tracker: Follows the central bank rate. Popular in some countries, but your payments will fluctuate

Loan Length: The Trade-off

Shorter loans mean higher monthly payments but way less interest overall. Longer loans spread the pain over more years but cost you loads more in the long run. Most people go for 25-30 years as a compromise.

• 15 years: Painful monthly payments, but you'll save tens of thousands in interest
• 25 years: The sweet spot for many - manageable payments, reasonable total cost
• 30 years: Lowest monthly payments, but you'll pay through the nose over time

How to Get a Better Deal

Want to save money? Here's what actually works:

• Sort your credit score: Even a small improvement can save you thousands over the loan term
• Save a bigger deposit: More upfront cash = better rates and no PMI
• Shop around like mad: Different lenders offer different rates. Don't just go with your current bank
• Consider paying points: Pay extra upfront to lower your rate. Do the maths first though
• Show stable income: Lenders love predictability. Freelancers have a tougher time, unfortunately
• Time it right: If you can wait for rates to drop, it might be worth it. But don't try to time the market perfectly