When looking for a loan calculator check the site you visit to see what else it offers with the loan calculator. Most sites simply provide a list of the loan calculators offered and leave you to guess which might be the most appropriate and then to input the data required to calculate repayments. Better sites will provide you with a brief explanation of the functions of each loan calculator and may prompt you with some questions, the answers to which can have a significant impact on your monthly mortgage repayments. As an example a client of mine recently checked out a number of sites and found one or two that actually provided detailed explanations of the different data sought and the reasons why it was required. The search for a loan calculator not only resulted in her learning quite a lot about different mortgage terms but also gave her a clearer idea on how she would need to manage her cash flow if she were to proceed with her planned property purchase.

One site she visited provided her with the standard repayment loan calculator as well as a comparison loan calculator, which enabled her to check the rates of her preferred lender with those of another one that had been recommended to her. Another loan calculator prompted her to consider a 100% offset loan. She had not heard of 100% offset loans but a brief explanation of the product and how it worked was provided and she decided to compare a standard mortgage with one that also offered a 100% offset.

Using the loan calculator she entered the loan amount ($250,000) and interest rates – 7.95% p.a. for both mortgages. She then included an amount of $20,000 which she had available to put into in an “offset account". At the time the $20,000 was in a savings account with her Credit Union earning her around 3.5% p.a. and the interest she earned on it was taxable as income. Under the proposed 100% offset mortgage, by shifting the $20,000 to an offset account she could obtain the same interest rate of 7.95% p.a. that she was paying on her mortgage, on the deposited funds. Furthermore because of tax concessions available with this sort of structure she was not taxed on the interest. While the interest rates on both loans were the same, the loan calculator clearly demonstrated the much better cash flow position that resulted with the 100% offset mortgage facility.

Her standard interest only monthly repayment on $250,000 @ 7.95% was $1656.25 or $19,875 per annum.

Put simply; under a 100% offset account the monthly interest is calculated against the outstanding loan balance under the mortgage less the amount deposited in the offset account. In this example

$250,000 less $20,000 = $230,000 @ 7.95% = $1523.75 per month or $18,285 p.a.

Monthly saving under the offset loan = $132.25 or $1590 per annum.

My client paid $18,285 annual interest on her loan of $250,000, which reflected an interest rate of 7.32% p.a. - quite a significant improvement on the standard rate of 7.95% p.a.

You can learn a lot when looking for a loan calculator particularly if you visit sites that not only offer loan calculators but also give you an on-the-spot education about a variety of mortgages available.