The best way for a home buyer to be in a good position to get the best rates and loan terms is to have cash on hand. Banks like to see borrowers who are self sufficient and who have a large down payment ready when completing a loan application. A larger down payment helps borrowers avoid the higher fees and increased interest rates associated with low down payment or no down payment type loans. Down payments above a certain percentage also guarantee that a borrower will not have to obtain mortgage insurance, which is an added cost, in order to secure a home loan. With this in mind, some borrowers may choose to forgo searching for a loan right away, waiting instead until they are in a more advantageous financial position in order to get exactly what they want from the lender. For these future home buyers, establishing a savings account is the best approach and using a savings calculator will help them determine when they will be ready to apply for a home loan.
Before using the savings calculator, buyers should use other calculators, such as the buying power calculator and the repayment calculator, to get an idea of how much they need and how much they can afford. Then these buyers should contact a few lenders to determine the down payment amount required to avoid non-traditional loans and mortgage insurance. Banks, always looking for well-qualified borrowers, should have no trouble giving out this information.
Once you have an idea of the amount of a down payment you will need, try the savings calculator. You will need to furnish the following information to the savings calculator in order to get the best results:
- Initial deposit: how much you will deposit to start the savings account
- Ongoing deposit: how much you will deposit on a regular basis
- Deposit frequency: how often you will make these deposits
- Interest rate: return on deposit provided by the bank
- Term: How long you want to “save up” for
The savings calculator will use this data to let you know the total at the end of term, which how much money you will have at the end of the term you defined, based on the total amount you put away and the earned interest. It will also list your effective yield, which it the total percentage of your deposit over time that you earned in interest. Patient home buyers can save money by saving up for a good down payment to avoid fees and unfavourable rates reserved for less-qualified borrowers. The savings calculator will give you a good idea of what saving can do for you and how long it may take.
Important: This calculator is provided to be use as a guide only and should not be considered a quote, a loan offer, or investment advice. Other criteria may need to be considered, and before taking out a loan you should always consult with your personal financial adviser.