What A Mortgage Calculator Doesn’t Tell You

How accurate are mortgage calculators?

Mortgage calculators come in a range of styles. You have them for residential mortgages, Buy to Let, commercial, bridging and development loans. I’m primarily going to touch on the commercial / bridging / development side of things today.

Buy to Let and residential calculators are fairly accurate. The products are standard and the criteria is pretty obvious, so those can give you a really good gauge.

I’d say with 80% to 90% certainty that the products that you’re quoted through a calculator would be very close – because there are very few variables in them.

With commercial, development and bridging there’s a lot more to consider and present to the lender. The calculators are accurate based on the information you put in, but it can’t factor in all of the elements. There’s always room to tweak the results.

Does a mortgage calculator always give you a true indication of how much you could borrow?

Not necessarily, but it gives a very good idea. Lenders consider additional factors like credit history, existing debts, affordability stress tests and existing assets.

So in the case of commercial bridging development, if you have other assets, we can use those and cross-charge them. That will dramatically change the presentation of a case.

Potentially going from 70% Loans to Value to 50% Loan to Value, for example, will improve the rates, the borrowing, your terms and potentially lender options. There are lots of factors you can’t put into a calculator that need to be considered.

Will a mortgage calculator show me all the rates and offers available by different lenders?

No, it won’t show you every product and every lender, but it should give you virtually all of them. It depends on where the information’s coming from.

In the case of bridging and development, there are hundreds of different bridging and development loans out there – private and public ones. You’re not going to have all of them available to you.

But a calculator will give you a very good idea of where you could be. The ones quoted will almost certainly be more popular, with bigger market share. They will be the better kinds of products.

How do I know I’m putting accurate information into a mortgage calculator?

It’s important to enter realistic figures for current value – a good estimate. If you’re looking at bridging development, you’ll need an idea of build costs with a builder’s quote upfront. You also need the Gross Development Value (GDV), which involves looking at comparables on the street to get a good idea of what the finished value might be.

They’re not going to be exact. You’re not a valuer. But just take a realistic view – don’t put it down as worth £4 million if realistically the street cap is £1 million – it just blows the numbers out of the water when it gets to a lender. They will immediately sense-check it and correct you if you’re really wrong. Don’t get your hopes up by fudging the figures.

Does a mortgage calculator work to real-time interest rates?

They are fairly close. Most of the information from calculators is sent from the lenders to the calculators via back office software. They update them a couple of times a month if the products change – if they don’t change, there’s no update.

Most of the time the calculator will tell you that the product is accurate as of a certain date.
Lenders are very hot on updating these, so if they have changed the product, it’s likely to be accurate on your calculator.

What does a lender take into account when looking at affordability that a mortgage calculator may not show?

With residential and Buy to Let, one thing they can’t take into account is complex income. If you’re employed and you have a standard paycheck earning you £50,000 a year, that’s very simple. The calculator can work that out.

But perhaps you’ve got complex income: you’re self-employed, your business has retained profits, you’ve got income from rental properties as well, you do overtime… All these different factors make it far too complicated for a calculator.

It can’t consider all those points along with lender requirements and give you accurate feedback. So take calculators with a pinch of salt, but if you’re putting in a very simple enquiry, you’re likely to get very close figures and results.

If there are factors you can’t put into the calculator, be aware that some tweaking will be involved, but the numbers should give you a good guide on who to speak to and your expected costs.

Do mortgage calculators take credit history into account? How can this affect the outcome?

No mortgage calculators I know of will do a credit check. You don’t give enough personal information for that to happen.

They won’t check your credit score, but they make the assumption that you’re paying credit unless you tell the calculator otherwise. Not all of them will have this option, and if they do, they might ask you if your credit is excellent, good, medium or poor.

It won’t allow you to put in what’s actually happened. With events on your credit report, like a missed credit card payment or utility bill, a default or CCJ, it’s impossible to put those in a calculator and see how a lender might respond.

The calculator gives you a guide and then your broker sits down with you, looks at your credit report, compares the results and then updates them to reflect what is and isn’t possible.

Do mortgage calculators take into account additional fees or costs?

Yes, as a general rule. The one on our website will give you a range of fees including valuation where possible. That’s more difficult for some of the bridging and development ones.

Stamp duty costs are on there and early repayment charges show as well, if they’re applicable. So, yes, most costs should be included. It should give you a very good overview of the entire cost profile for the product you’re looking at.

Do mortgage calculators take into account different income sources and fluctuation?

Usually not, unless you’ve got very simple income, i.e. PAYE. If you have a pay slip every month, even if you’ve got two jobs and you work part-time at the weekends and full-time during the week, it’s simple to put it through on a calculator.

If the income becomes a bit more complex, a calculator can’t capture that fully and won’t be able to include every lender’s requirements.

For example, some lenders will use all of a bonus, some will use 50%, some will take an average of overtime for three months, some might use one month. It’s impossible for a calculator to do all of those things at once.

So for complex income, use the calculator as a guide and then switch your broker for refining those results.

What are the benefits of using a mortgage broker straight away when looking for a mortgage?

There are lots of benefits. Calculators give you a very good guide – as a quick snapshot of what’s available in the market and what costs are like.

But there are a lot of other factors, as we’ve covered. If your credit is different, if your income is complex or there are other assets in the background, the presentation of your case is a really key factor when it comes to development, commercial and bridging.

A calculator will show you what the market products are and what the lenders are offering, but not what a broker will be able to negotiate for you. And a lot of these products are negotiable. A broker can present the case in a certain way to reduce the rate, reduce the costs or vary things by including extra assets.

With some lenders, we have preferred rates because we do a lot of business with them – but that’s not advertised on a calculator. You wouldn’t know that until you came and spoke to us. We can then apply those discounts and demonstrate your actual results. There is a lot of value in using a broker when it comes to these points.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

SOME BRIDGING FINANCE IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.