What A Mortgage Calculator Doesn’t Tell You

Hello, and this time on the Mortgage and Protection podcast, Scott is here from Propertyze to answer your most popular questions when it comes to using a mortgage calculator. But welcome back, Scott. Thank you for joining us again. Thank you for having me back. You're very welcome. Let's get straight into these questions then. So first of all, people would like to know how accurate are mortgage calculators? So mortgage calculators come in a range of styles. You have them for residential mortgages, by-tilets, commercial bridging and development. I'm going to kind of touch on the commercial bridging and development side of things primarily today. But the by-tilet residential ones are fairly accurate. The products are fairly standard, criteria it's very obvious. So those give you

a really good game. I'd say 80-90% certainty that products you're quoted through your calculator would be very, very close because there's very little variables in them. With the commercial development and bridging, there's a lot more to consider and a lot more presentation. So they are accurate, basically, the information you put in, but it can't factor in all of the elements. So there's always room to tweak them, I guess. Right. Okay. Well, that's really useful to know there. So with that in mind, then, let's follow on to the next question here. Does a mortgage calculator always give you a true indication of how much you could borrow? Not necessarily. It gives a very good idea. Lenders consider additional factors like credit history, existing debts, affordability stress,

tests, existing assets. So in the case of commercial bridging and development, if you have other assets, we can use those and cross charge them and that will dramatically change the presentation of a case. It goes from 70% loans of value to 50% loans of value. For example, which will improve the rates, improve the borrowing, improve your terms, improve lender options potentially. So lots of factors that you can't put into a calculator need to be considered as well. Right. Okay. So something to bear in mind there. Okay. Let's look at this question then that people would like to know. 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 depending on who's calculated, where the information is coming from. In the case of bridging and development, hundreds of different bridging and development lenders out there, private ones, public ones. So you're not going to have all of them available to you. But picking a calculator will give you a very good idea of where you're going to be because the ones that are being quoted are almost certainly going to be the more popular ones with a bigger market share. So they're going to be the better kind of products. Okay. Which makes sense there and again, useful to know. So this is a good question. So how do I know I'm putting accurate information into a mortgage calculator?

That's a very good question. It's important to enter realistic figures, I guess, for current value, a good estimate, if it's bridging or development, an idea of bill cost, having a builder's cry up front, looking at GDV. So looking at comparables in the street, having a good idea of what the finished value might be. They're not going to be exact. You're not a valuer, but just having a very realistic, don't put it down as worth 4 million. Realistically, the street caps a million, because it just blows the numbers out of the water when it gets to a lender, because the lender will immediately sense check it and correct you if you really are. Don't get the hopes up by fudging the figures. Okay. Well, I think that's a good top tip there, Scott. Thank you for that. Let's move

on then. So people would like to know, does a mortgage calculator work to real time interest rates? Real time interest rates, fairly close. Most of the information calculators is sent from the lenders to the calculators' back office software. They update them a couple of times a month if the product's changed, if they don't change, they don't update them. Most of the time the calculator will tell you that the product is accurate as of 1st of January or 1st of February or 10th of December, where it might be. So you'll have an idea when that product was last updated, but lenders are very hot on updating these. So if they have changed the product, it's very likely to be accurate on your calculator.

Okay. Well, that's good news there. Hopefully that sounds reassuring. So again, this is another good question here. So what does a lender take into account when looking at affordability that a mortgage calculator may not show? So in the case of Presidentials and Bitalettes, one thing it can't take into account is complex income. If you're employed and you have a standard paycheck and you own 50 grand a year, it's very simple. A calculator can work that out. And if you're Bitalettes, that's got simple income. But if you've got complex income yourself, employed, your business has got retained profits, you've got income from rental properties as well, you do a bit of overtime. All these different factors, it's just far too complicated for a calculator to be

able to consider all those points and consider lender requirements on those points and give you accurate feedback. So take calculus with a pinch of salt. If you're putting in a very simple inquiry, you're likely to get very close figures and results. If there are factors in that you can't put into the calculator, just be aware that there's obviously some tweaking to do, but the numbers coming out should give you a good guide on who to speak to or what your expected cost should be. Okay. So again, really useful to know there. Thank you for that. So moving on and with all that in mind, actually, with what you've just said there, do mortgage calculators take credit history into account? How can this affect the outcome?

So mortgage calculators, none that I know of, will do a credit check, because you won't give a lot of personal information for that to happen. So they won't check your credit score, which means that they make the assumption that you're clean credit unless you tell the calculator that you don't have clean credit. Not all of them will have this option. And even if they do, it might just say, it's your credit. Excellent, good, medium, poor. It won't allow you to put in everything that's happened. So if you have some kind of events on your credit report, a missed credit card payment, a missed utility bill, a default or something or CCJ, it's impossible really to put this onto a calculator and factor in how a lender might respond to those points.

So this is where the calculator gives you a guide, and then your broker sits down with you, goes to your credit report, compares the results, and then updates them to reflect what is and is impossible. Right, okay. So again, another important point there really, especially if that applies to you. Okay, so we've got three questions left. Moving on to this one, do mortgage calculators take into account additional fees or costs? Yes, it's a general rule. The one we use, which is on our website, will give you arrangement fees, it will give you estimates of valuation fees, if possible, as that's more difficult for some of the bridging and development ones. But stamp duty costs we can put on there. And repayment charges will show on there as well, if they're applicable. So yes,

most of the costs should be shown on there. It should have a very, very good overview of your entire cost profile for whatever product you're looking at. Okay, so that's good news there. Now, I think you touched on this earlier on, do mortgage calculators take into accounts different income sources and fluctuation? So we kind of already touched on this, usually not, unless you've got very simple income, i.e. PAYE, you have a pays every month, and maybe you've got two jobs, you work part time somewhere in the weekends, and you work full time during the week. Again, relatively simple to put through on a calculator for residential and things. If income becomes a bit more complex, it just won't capture that

fully, and it won't be able to calculate every lender's requirements for those. So some lenders will use all of the bonuses, some will use 50% of the bonus, some will use overtime average for three months, some will use it for one month. So it's impossible for a calculator to do all of those things at once. So if it's complex income, use the calculator as a guide, and then switch your broker for refining those results. Okay, so hopefully that's clear there now. And then just in summary, I mean, you've demonstrated it there, Scott, but what are the benefits of using a mortgage broker straight away when looking for a mortgage? Lots of benefits here. Calculus gives you a very good guide. It's a very quick snapshot of what's

available on the market, what costs are like, and what products are being available. There's a lot of other factors like we've covered off, if your credit is different, if your income is complex, if there are other assets and things in the background when it comes to development, commercial and bridging. Presentation of a case in those examples is a really, really key factor. And the other thing that the calculator won't show you, again, with the commercial development and bridging, it will show you what the market products are, what the lenders are offering out to the market, but it won't show you what a broker will be able to negotiate for you. A lot of these types of products are negotiable. A broker can present the case in a certain way,

reduce the rate, reduce the costs, vary it by including extra assets, the value added there. So for example, some of the lenders we use, we have preferred rates with because we do a lot of business with them, but that's not advertised on a calculator. You wouldn't know that we get preferred rates with a lender until you did a search and then came and spoke to us. And then we can apply those discounts to those and then demonstrate your actual results afterwards. So lots of value from a broker when it comes to these points. Okay. Well, there we go. Thank you for that, Scott. Hopefully that's proved useful to anyone listening to this. And I'm sure we'll speak to you again on the podcast soon. Look forward to it. Thank you.

Please note, your property may be repossessed if you do not keep up with your mortgage repayments. Sunbridge in Finance is not regulated by the Financial Conduct Authority.