Mortgage calculators tested

It’s de rigueur these days for banks to have web sites and, just as de rigueur, for each site has to have a collection of home loan calculators.

Some bank sites go much further than this, offering every conceivable type of calculator.

All the major home lenders have at least two calculators. ASB Bank, for example, allows you to calculate how much you can afford to repay each month and how much you will need to borrow (more than a little obvious and not requiring a calculator, I thought). A third calculator allows you to compare different types of loans including floating, fixed and interest only loans.

WestpacTrust offers five different options, although its fifth looks at a product exclusive to that bank. I particularly liked its "how much house would my rent get" calculator.

Several of the banks provide a calculator for their versions of revolving credit type home loans.

From a concept point of view, I’d be inclined to rate ANZ Bank’s "borrowing power indicator" and "budget planner" calculators as the best available from any bank.

That’s because it explores your cost of living in great depth, even taking into account the cost of birthday presents and holidays.

National Bank, for example, asks only about other financial commitments such as credit card costs and decides itself how much to allow for living costs.

Curiously, ANZ’s is the only site that explicitly takes into account how much children cost.

A lot, ANZ Bank reckons. For example, it calculates that a childless couple with a combined $1,250 weekly income could afford to borrow $224,794. If that same couple had two kids, their borrowing power is reduced to $190,404.

The only trouble with ANZ Bank’s borrowing power calculator is that its answer varies depending on whether you enter your income on a weekly, monthly or annual basis.

Our theoretical couple with two kids and a combined annual income of $65,000 (52 times $1,250) could borrow up to $205,947, the ANZ calculator reckons.

ASB Bank’s affordability calculator would rank a close second – perhaps wisely, it only offers the choice of entering your net monthly income.

Reassuringly, those banks which offer like-for-like comparisons of how much a particular type of loan costs in monthly repayments come up with the same answers. ASB Bank, Bank of New Zealand and National Bank all conclude that a $195,000 25-year floating rate loan at the current standard 6.7% will cost you $1341 a month.

I found it somewhat annoying that WestpacTrust’s "can I afford it" calculator automatically reduces to loan term to the least period you can afford. All the other sites allow you to decide the length of the term yourself.

The WestpacTrust calculators also appears to be overly optimistic, at least based on New Zealand’s recent financial history. They assume an average 7% mortgage interest rate.

But WestpacTrust offers the only calculator that allows you to mix fixed-rate and floating rate parts of the same loan. (WestpacTrust also has a capped rate option where your interest rate can fall if wholesale rates fall but can’t rise, no matter what wholesale rates do.) That it’s the only one to do so is rather surprising considering most mortgage holders these days tend to have a mix of both.

Unlike the other banks, AMP Banking’s calculators aren’t immediately obvious. I had to use the site search facility to find them.

It has a useful home loan comparison calculator that allows you to compare up to four different loans at once, including the impact of different interest rates and bank fees . Its drawback is that it doesn’t provide the ability to compare a fixed rate loan with a floating rate one.

ASB Bank would get my vote for the best comparative calculator. Its one allows you to compare three different loans at once, both floating and fixed rate options, varying the terms and the loan type.

It offers three different loan types, "table," where repayments are spread evenly over the term of the loan, "reducing," where repayments gradually reduce over the term of the loan, or "interest only."

For example, my hypothetical household has net income of $4170 a month and total living expenses of about $2600, leaving about $1570 of disposable income. Assume they have a $50,000 deposit and want to buy a $240,000 house.

The calculator tells me a 25-year table loan of $195,000 at the current (6.7%) variable rate would cost $1341 a month. The same loan fixed for three years at the current (7.45%) rate would cost $1434 a month. Interest only on the three-year fixed rate would be $1210 a month.

A reducing loan probably wouldn’t suit my hypothetical household: a three-year fixed reducing loan would start off costing them $1860 a month.

But if they wanted to sail close to the wind, they could consider reducing the term. A 20-year $195,000 loan fixed for three years at the current rate would cost them $1564 a month.

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