Updated: Jul 1, 2023
The Mortgage Interest Analyzer is a powerful tool that allows you to observe and understand the impact of interest rates on your mortgage. By modifying the Mortgage amount, interest rate, and amortization period in the input field, you can gain valuable insights into how these factors influence your decision-making process. The interest rate represents the commitment made by the Borrower until the end of the agreed-upon years (i.e., locked-in), such as two or three years, and so on. This interest rate determines your monthly mortgage amount and total mortgage interest. It directly affects the amount of effort required to pay off your mortgage. Therefore, understanding the interest rate's implications is essential when deciding. In today's world, it is highly unlikely to obtain a mortgage at a zero percent interest rate. Although halal mortgage providers are available, many may not adhere strictly to halal principles, as they manipulate the calculations. While the total mortgage interest and principal amount remain the same, the term "interest" may be substituted with "rent" to conceal its true nature. Consequently, securing a zero-interest loan or mortgage is exceedingly rare in contemporary society. The issue of interest, or riba, has been a significant concern highlighted by Prophet Muhammad (Peace be upon him), who warned Muslims about the detrimental effects of interest fourteen centuries ago, making it a crucial factor in Islamic financial practices. Therefore, it is of utmost importance for individuals following the Islamic faith to consider the impact of interest rates when making mortgage-related decisions. Our Mortgage Interest Analyzer is specifically designed to assist you in visualizing your interest profile based on different interest rates. Using this tool effectively, you can better understand how various interest rates affect your mortgage. Eventually, this tool will help you decide whether to proceed with the mortgage or explore alternative options that align with your financial beliefs. With the Mortgage Interest Analyzer, you have the power to make informed financial decisions and navigate the complex landscape of mortgages with confidence.
Observe the change in interest rate by modifying Mortgage amount, interest rate, and amortization period in the input field to learn more about how does impact your selection of the interest rate. The interest rate is the one to be committed by the Borrower until the end of the agreement years, such as two years, three years, and so, on. The interest rate can impact your monthly mortgage amount and mortgage interest, and you must work more or less to pay off the mortgage.
The analysis compares an actual market Interest rate vs. Interest rates ranging from 1% to 10 %. If values calculated in the "Save column" is positive (+) and negative (-) explains how the interest rate matters if higher or lower. The calculation also shows how much you would be paying, more or less. For example, if you choose a mortgage rate of 3.00%, the interest rate of 2.50% would save you 18% interest, and an interest rate of 3.50% would make you lose 19% interest on your chosen mortgage amount. So there is a 20% cost savings difference between each 1% interest rate up or down compared to the actual interest rate you want.
If you decide to keep paying regular (Monthly, Semi-Monthly, Weekly, or Bi-Weekly) payments without applying additional and accelerated payments strategy, then you should re-think before you decide, and here are a few starting points.
Most often, you think about the rate of return without comparing the mortgage amount and how the mortgage calculations and the rate of return calculation work. The rate of return on mortgage amount is guaranteed, while investments are not guaranteed. Many people lost monies in investments, while few have been successful. So there is some risk involved in the investments. You are guaranteed to get savings on interest in the case of a Mortgage, which is self-evident and proven. There is no situation or condition where you will lose the mortgage interest if you have the strategy in place.
By investing the money instead of paying in the mortgage, you are putting two feet on two shaking pillars. In the pillar of mortgage, you are losing the money in interest while you would not know whether you would be in loss or profit out of investments.
The money you will invest in the Mortgage to save interest would be less than 5% of the mortgage amount annually which is quite less than the investment you have to make to get a safe rate of return through investments. So here is what we recommend; Compare what you will pay yearly in the Mortgage to save interest and the interest savings you have guaranteed to receive vs. the return on investments you plan to do for the equal amount. Also, Compare the mortgage calculation interest rate vs. investment rate of return and find out in which case you will make money.
DISCLAIMER: We strive to offer users accurate information to the best of our knowledge. However, laws are subject to change; therefore, the user assumes full responsibility and should utilize the information on our website and this tool as a reference per our terms and conditions. If you believe any part of the calculation is incorrect or contains errors, we kindly request your feedback here.