Buying a new home is exciting, and with access to so many unique digital tools, it is now easier than ever before to find a home you love and determine how affordable it is for you and your family. One way potential homeowners plan for their homes financially is by using a mortgage calculator.
In Mississauga, mortgage calculators work by taking bits of information regarding your income, potential down payment, and theoretical interest rate and tell you how much you will get for your mortgage. Like all internet tools, there are pros and cons to using a mortgage calculator.
As a leading mortgage firm here in Mississauga, StartMYPlan strives to ensure our clients always have all of the information they need before making a big decision. If you are considering using a mortgage calculator to plan your home purchase, here is what you should know about the benefits and potential pitfalls of online calculators.
Pro: Tells You What You Should Be Looking for in Terms of Price
Perhaps the first pro many homeowners discover when using a mortgage calculator in Mississauga is that you get an estimate for your buying allowance. That’s a huge boon because it gives you important information about the size of home you can afford and even the location you should be looking in, as some areas are more expensive than others.
Without using a mortgage calculator or speaking to a mortgage broker, you could look out of your price range before you begin your search. Nothing is more disappointing than finding the home of your dreams, only to have those dreams dashed when you realize they aren’t in your budget.
Con: Doesn’t Account for The Rate Type You Will Get
A mortgage calculator will give you an estimate on the amount of money a bank might lend you to purchase a home. However, it won’t tell you the type of mortgage you will get, any fine print and details regarding prepayment penalties, or other important information.
That means there could be finances unaccounted for in your original estimate, which could prevent you from buying a home in quite the price range you were promised. Remember, an online calculator is a digital tool. There is plenty of room for error because it doesn’t have all of the information it needs to give a completely reliable number.
Pro: Gives You an Idea of Cost for Renting vs. Owning
A mortgage calculator may not be able to give you a 100% defined number for repayment and home value, but it can give you a pretty clear idea of whether renting or buying is best for you. It shows you a potential monthly breakdown of your housing expenses, which lets you calculate a comparison if you were to rent. That comparison sparks questions like:
- Will I make the same monthly payments if I rent vs. buy?
- What do I get out of this transaction at the end of my rental/buying period?
- What value will this transaction add to my life?
- How many years will I be making these payments?
Something interesting to note is that rent prices across Mississauga are increasing on an annual basis. Depending on your mortgage type, you may avoid increases altogether. That means you could pay far less monthly for a larger dwelling in the future. You also get to keep your home vs. the apartment you pay for but have no accumulating equity in.
Con: A Mortgage Calculator Can’t Help You Determine Intangible Factors
When you use a mortgage calculator, you get valuable insight into the amount of money you may spend on a new home. What you don’t get is information about all the additional costs owning a home includes, such as:
- Repairs (painting, varnishing, broken hinges, etc.)
- Cleaning (gutters, landscaping, vents, etc.)
- Insurance (mortgage insurance, home insurance, etc.)
- Maintenance (plumbing, electric, etc.)
- Appliances (unlike rental units, homes don’t come with a fridge, stove, washer, dryer, etc.)
These are only some of the costs homeowners incur regularly. You also need to look into the added expenses of water, electricity, fuel for heat, maintenance, and property taxes.
Pro: You Can Speak to a Broker with Some Knowledge of Your Potential Loan
There is nothing worse than walking into an office to speak to somebody about lending money and not knowing anything about them. A mortgage calculator gives you a glimpse into the potential loan a lender will offer. That not only lets you start your hunt for a new home but gives you an idea of your value as a client to the bank you choose to borrow from.
Your mortgage brokerage here in Mississauga can help you find the best lender for your situation. As you begin your meeting, having the figures from your mortgage calculator will be a big boost to your confidence and keep you from taking less than you know you are worth.
Con: A Mortgage Calculator Doesn’t Show You the Whole Picture
As you can see from the many cons listed above, a mortgage calculator only gives you a small peek at your potential financial position. There are so many unlisted variables, which can be a disappointment when you finally meet with a bank or broker and find out you can’t get the home you had your heart set on.
Fortunately, your broker will work with you to get you the most money with the least potential risk.
Should I use a mortgage calculator?
StartMYPlan works with many Canadians looking to buy new homes, and while a mortgage calculator can’t tell you all the facts, there’s no harm in trying one. What is essential when using an online tool like this is to keep an open mind and take all of the information you learn with a grain of salt. Remember, there is always room for both error and improvement with any digital application.
For more information on calculating your mortgage, call sMp Mortgages at 1-888-915-5139 or contact us here.