Although owning a home is a key milestone in our lives, the process to get there is hardly simple. According to PropertyGuru’s Consumer Sentiment Study for the first half of 2020, only 18% of respondents reported being “very familiar” with the process. Almost half of them indicated that unfamiliarity with the paperwork was a major challenge, with a further 2 in 5 respondents unaware that they could even refinance their home loans!
And we haven’t even brought in the numbers and mathematical calculations yet. Even for the most mathematically inclined among us, the calculations behind monthly home loan instalments can be challenging to wrap our heads around. Plus, even if we do understand the concepts behind it, that still doesn’t mean we want to open an Excel Sheet and painstakingly key in the figures ourselves.
So, it’s no surprise that over 50% of respondents reported having used online mortgage calculators. These are forms where you key in some relevant details and they give you an estimate of your monthly home loan instalments. They are extremely helpful for budgeting purposes, and it doesn’t make sense not to make use of these tools.
But not all mortgage calculators are created equal.
Introducing PropertyGuru’s Online Mortgage Affordability Calculator
Now, we might be biased, but we have no qualms in saying that our Mortgage Affordability Calculator is by far the most useful one out there.
The key word here is “affordability”. It’s not just about telling you how much a home loan of X amount would cost you each month.
Estimate what you can comfortably spend on your new home
Rather, our calculator is a comprehensive budget planning tool that – if used correctly – will ensure your home loan instalments will always comfortably remain within your budgetary limits. Considering that a home is likely the largest purchase in our lives, we cannot understate the importance of this to your financial future.
7 Reasons Why PropertyGuru’s Is The Best Online Mortgage Calculator Out There
Of course, this will ultimately depend on how you end up using our calculator. With that in mind, here are seven reasons to use our mortgage affordability calculator. Read through these carefully, and then bookmark the calculator page to you’ll have it ready for when you start looking to buy a home.
#1: Find Out the Exact Maximum Price Point You Should Be Searching For
A calculator that only tells you how much a certain loan amount will translate into monthly instalments may be helpful if you want to refinance, but much less so if you want to buy a new property. Further, this kind of simplistic calculation also ignores key regulatory requirements from the Monetary Authority of Singapore (MAS), such as:
- Total Debt Servicing Ratio (TDSR) requirements – capped at 60%
- Loan-to-Value (LTV) limits – currently set at 75% for the first property loan
Our Affordability Calculator accounts for all that based on your income and other debt obligations. Better yet, instead of just telling you what the monthly instalments will be, it will translate those figures into the maximum property price (not just loan amount) you can afford. This will save you a significant amount of time in narrowing down your property search.
#2: Know How Much Cash You Will Need Upfront
Another MAS regulation that most mortgage calculators ignore is the downpayment required. Currently, for bank loans, regulations stipulate that 5% of the property price must be paid in cash while the other 20% can be funded using your CPF accounts
This means that, even if you have sufficient monthly income to afford a certain loan quantum, if you don’t have enough upfront savings, you might still have to go with a lower-priced property. Our calculator takes your savings (including CPF) into account, so you will know not only how much you will have to pay per month but also how much you will have to pay upfront.
#3: “Tune” the Maximum Property Price Until You are Comfortable
While the maximum property price is a helpful cap to make sure you won’t bite off more than you can chew, you may want an even larger buffer, just to be safe. But at the same time, you understandably don’t want to keep adjusting your inputs – for instance, by lowering your monthly income – just to do so. That’s way too tedious.
That’s why PropertyGuru’s Mortgage Affordability Calculator has a built-in “slider” function. Based on the maximum property price, you can adjust it downward – in increments of S$1,000 – and see how your downpayment requirements and monthly loan instalments would change accordingly.
#4: Find a Property That Matches Your Desired Lifestyle
Some people would rather stick to a strict spending budget for food and entertainment expenses so they can get a higher value property. Others might prioritise living it up a little more and not mind getting a cheaper property to afford such a lifestyle. Neither is wrong – they are just different. That is simply reality.
One advantage of our Affordability Calculator is that you can factor all this in by changing the inputs in the ‘credit card payments’ or ‘other commitments’ section in the calculator. Feel like a $4,000 monthly credit card bill is totally reasonable? Go for it – our calculator will automatically adjust things so you can see the balance between property affordability and your desired lifestyle.
#5: Count in Your Significant Other As Well
As the saying goes, two heads are better than one. If you have someone you want to or already are sharing your life with, it makes sense to jointly purchase a property. Our calculator easily allows you to factor in a joint buyer’s finances, so you can budget not just for yourself, but for your family (present or future) as well.
#6: Get an Automatic “Margin of Safety” From Default Interest Rates
Our calculator uses an interest rate of 3.5% per annum when calculating the monthly instalments. This is higher than current mortgage rates, which as of June 2020 are hovering around the 1.4 to 1.8% range, thanks to the low interest rate environment.
What this means is that there is a built-in “margin of safety” to account for future interest rate increases. You can thus use the monthly loan instalment figures for budgeting without worrying about how they may increase in the future. It is a best practice to build in a buffer when doing financial planning to account for the unexpected and give yourself peace of mind. Our calculator does this for you automatically.
As we said, our goal for you when using this calculator is that your monthly instalments always remain comfortably within your limits.
#7: Instantly Follow Up with the Best Home Loans Available on the Market
Once you get your results from our calculator, you can instantly follow up by comparing, selecting, and securing the best home loan rates for you. If you want even more personalised advice, our Home Finance Advisors will be happy to speak to you to see how you can make the most out of your available options.
For more helpful information on all things home financing, please also check out the rest of our home financing guides.Chat with us on Whatsapp Fill up an online form
Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.
PropertyGuru will endeavour to update the website as needed. However, information can change without notice and we do not guarantee the accuracy of the information on the website, including information provided by third parties, at any particular time. Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs. PropertyGuru does not give any warranty as to the accuracy, reliability or completeness of information which is contained on this website. Except insofar as any liability under statute cannot be excluded, PropertyGuru and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.
This article was written by Ian Lee, an ex-banker turned financial writer who hopes to use his financial background and writing skills to help raise people’s financial literacy levels – a necessity in our modern world.