retirement.org.nz

The Commission has just launched the way for those with a head-in-the sand approach to interest rises to find out what their mortgages might cost in the future - New Zealand’s most comprehensive online mortgage calculator service.

Commissioner Diana Crossan said it can be tempting for people on a fixed term mortgage to ignore the highest interest rates in seven years until it hits them hard in the pocket a year or two down the track.

“Say someone fixed 3 years ago on 6.99 percent, unless they plan ahead they could get a very rude awakening in two years when they have to refix at say 8.5 percent. On a $250,000 mortgage, they could be facing an extra $300 plus a month if interest rates continue to rise.

“Everyone who has a mortgage, fixed or floating, needs to do the figures and ensure they are budgeting now to cover the increase in payments. That’s where our new mortgage calculators come in. The new mortgage calculators are unique. They help people see how their current situation would change with a rise in interest rates.

“It’s very important that New Zealanders understand that financial markets do change and that they plan ahead, and regularly review their financial situation, to make sure they are able to weather the changes”, says Ms Crossan.

The calculators enable people to look at three concurrent mortgages and see how long they will take to repay, and how much interest they will be charged.
This new service is perfect for anyone trying to figure out what percentage of their mortgage they should have on a floating rate and what they may want on a fixed rate.

The service is free, independent of banks or financial advisers, unique in the level of detailed information it provides homeowners and is available 24/7.

The information includes three brand new calculators that sit on the Commission’s independent Sorted website - www.sorted.org.nz.
The calculators will help anyone who has an existing mortgage or is planning to enter the property market. They include:

1. The Quick Mortgage calculator, which helps you work out how much you can afford to repay and how this will effect the time and cost of repaying up to three mortgages.
2. The Principal and Interest calculator, which shows how much principal and interest you will pay for on your mortgage/s and how different repayments levels will affect this.
3. The Comprehensive Mortgage calculator, which combines the two calculators above with an additional goal setting option so you can work out targets for specific periods for up to three mortgages.

Ms Crossan said the calculators would reduce confusion and complexity around mortgages by helping people work out exactly how much their mortgage will cost under the interest rate increase. It enabled homeowners to easily look at the long term picture.

“Finding out the total amount of interest you will have paid on your 20 year loan is scary but also empowering. Knowing you can save $30,000 by paying back your $250,000 home loan just a few years earlier is a real incentive to pay it back as soon as possible.

“Ultimately these calculators will help New Zealanders manage their mortgages and finances better,” said Ms Crossan.

The new calculators allow consumers to:

• Compare mortgage deals across lenders
• Work out how to arrange a home loan to pay the least interest
• Work out how much you’ll pay in interest over the lifetime of your mortgage
• Determine the total cost of your mortgage over time
• Calculate how much money in interest you’ll save by increasing your regular repayments by just five or 10 percent

Ms Crossan said the mortgage calculator service was part of the ongoing development the Sorted website to meet the personal finance information needs of New Zealanders.

Ends

For more information contact:
Robyn Cormack
Marketing communications manager
Retirement Commission
04 494 6243