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Mortgage Calculator

Calculating your monthly mortgage payments used to mean getting out a pen and paper and using maths skills you hadn't used since secondary school, or else just going to the local bank.

These days, however, there are a wealth of tools available online that can give you the information you need in seconds. Here's our guide to using them - and what to do once you're ready to go.

How does it work?

Unless you've just inherited buckets of cash from a rich uncle, you're probably going to be taking out a mortgage to finance buying a house - either partially or in full.

Mortgage calculators take the amount you will need to borrow, the annual interest rate as set out in the terms between you and your bank, and the term over which you will be repaying the money (generally between 20 and 40 years). It then tells you how much you will need to pay back each month.

In practice, this helps you to figure out whether you can afford the house at your current salary and borrowing level, or if it would be more fruitful to consider different sources of financing (or else just choose a different house to buy altogether).

Where can I find these tools?

As above, mortgage calculation tools are available at a few clicks of the mouse online. Several major banks have their own tools, but you can also use independent, third-party comparison sites if you prefer.

How can I lower my payments?

The best way to lower your monthly mortgage payments is to spread them out over a longer period, i.e. change the agreed term of repayment from, say, 30 years to 40 years, giving you smaller payments. Doing this can be a big help for young families who need to keep money tucked away in the early stages of their home ownership - but remember that you ultimately have to pay more interest.

Remember that it is always possible to "overpay" on your mortgage, meaning that you pay more than the prescribed amount in months where you can afford to. In other words, by spreading your mortgage over a longer term, you aren't necessarily consigning yourself to loads of accumulated interest - as you can, on your own terms, react to any changes in your financial situation.

You could also look into an interest only mortgage, whereby you replace monthly instalments with a series of one-off lump payments. This is a good option if you don't necessarily have a consistent, steady stream of income, but do anticipate the occasional windfall - say from inheritance, or dividends from an ongoing investment project.

I'm ready to go - what next?

Choosing a mortgage provider is something that you mustn't rush into. While it is - literally speaking - possible to change it halfway through your term, this usually carries a significant financial penalty, which only puts further strain on what can be a very difficult period for a young family.

It's important to shop around and try to find a mortgage deal - both in terms of the interest rate, length of term and stipulations in terms of penalties for partial or late payment - that suits your income patterns. Predicting what these will be for the next 20 or 30 years isn't easy, which is why you need to be sure your chosen company is accommodating to customers of all needs.

Below are some of the top-rated mortgage providers for first-time buyers in the UK (in brackets are the current interest rates they advertise):

HSBC (1.79%)

Yorkshire Bank (1.89%)

Cyldesdale Bank (1.89%)

Tesco Bank (1.93%)

Barclays (1.94%)

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