A Guarantor Home Loan Calculator is an essential tool for potential homebuyers who require a guarantor to secure a loan. This calculator helps determine the monthly repayments for the loan and assesses if the guarantor’s income is sufficient to support the loan repayments. Here’s how it works, along with the required inputs, formula, and example calculation.
Inputs Required:
- Loan Amount (L): The total amount of the home loan.
- Interest Rate (R): The annual interest rate of the loan.
- Loan Term (T): The duration of the loan in years.
- Guarantor Income (G): The annual income of the guarantor.
Formula:
To calculate the monthly repayment amount for the loan, use the following formula:
[ \text{Monthly Repayment} = \frac{L \times \left(\frac{R}{100}/12\right) \times (1 + \frac{R}{100}/12)^{T \times 12}}{(1 + \frac{R}{100}/12)^{T \times 12} – 1} ]
Where:
- ( L ) = Loan Amount
- ( R ) = Annual Interest Rate
- ( T ) = Loan Term in years
To determine if the guarantor’s income is sufficient to cover the loan repayments, a typical rule of thumb is that the guarantor’s income should be at least 3 times the annual loan repayments.
Example Calculation:
Assume the following parameters:
- Loan Amount (L): \$300,000
- Interest Rate (R): 5%
- Loan Term (T): 30 years
- Guarantor Income (G): \$100,000
Step-by-Step Calculation:
- Convert the annual interest rate to a monthly interest rate:
[ \text{Monthly Interest Rate} = \frac{R}{100}/12 = \frac{5}{100}/12 \approx 0.004167 ] - Calculate the total number of monthly payments:
[ \text{Total Monthly Payments} = T \times 12 = 30 \times 12 = 360 ] - Calculate the monthly repayment amount:
[ \text{Monthly Repayment} = \frac{300000 \times 0.004167 \times (1 + 0.004167)^{360}}{(1 + 0.004167)^{360} – 1} \approx \$1610.46 ] - Determine the annual loan repayment:
[ \text{Annual Loan Repayment} = \text{Monthly Repayment} \times 12 = 1610.46 \times 12 = \$19,325.52 ] - Check if the guarantor’s income is sufficient:
[ \text{Required Income} = \text{Annual Loan Repayment} \times 3 = 19325.52 \times 3 = \$57,976.56 ]
Since the guarantor’s income (\$100,000) is greater than the required income (\$57,976.56), the guarantor’s income is sufficient.
Conclusion
The Guarantor Home Loan Calculator is an invaluable tool for both potential homeowners and guarantors. It simplifies the process of calculating loan repayments and ensures that the guarantor’s income is sufficient to cover the loan, providing a clear financial picture. By inputting the loan amount, interest rate, loan term, and guarantor’s income, users can easily determine the monthly repayments and assess the guarantor’s financial capability. This ensures informed decision-making and financial planning.