Mortgage calculators may create ‘false hope’ for buyers

Mortgage calculators risk creating a false sense of security for first time buyers, it has been warned.

Brokers claim online tools that let buyers calculate how much they could borrow or what a mortgage would cost can sometimes be inaccurate.

Richard Davidson, Mortgage Advisor at onlinemortgageadvisor.co.uk, said that while online calculators can provide a useful starting point, they often fail to account for the complexities of individual circumstances.

He told the Newspage agency: “For a straightforward case, online mortgage calculators do a reasonable job, because most are simply applying an income multiple and showing you the maximum. Where they fall down is anything outside the norm, such as self-employed income, bonuses, overtime or a household with childcare costs and car finance.

“The simplified versions on lender websites can’t weigh those things the way an underwriter will. What surprises people is that the error usually goes the other way. Clients regularly tell me a calculator has given them a figure, and it’s often lower than what we can actually get them, because a number of lenders now go well beyond four and a half times salary for the right borrower.

“We use a simple income multiple table as a rough guide rather than a bespoke calculator. The real value is knowing which lender will look kindly on your circumstances, and no calculator can tell you that.”

Starting point but not the end product

Craig Fish, Director at Lodestone Mortgages, believes calculators can provide a useful starting point.

He adds: “Mortgage calculators are a useful starting point, but that’s all they are. We have one on our website, and like every online calculator it’s generic and should only ever be used as a guide.

“Part of the problem is that people are entering the figures themselves, without knowing the rules on allowable income, which vary from lender to lender. Bonuses, commission, overtime and self-employed income can all be treated very differently, and lenders also look at outgoings, credit commitments and dependants.

“A generic calculator can’t see any of that, so it can easily overstate or understate what you can borrow. A calculator gives you a ballpark. A broker gives you an answer. The only completely accurate calculators are the lenders’ own, and a whole-of-market broker can run your figures through them to find out what you can borrow and who will lend it to you.”

Ranald Mitchell, Director at Charwin Mortgages, warns that a calculator should not “create false hope and leave the broker to deliver the bad news later.”

He adds: “It should give people a credible answer from the start.”

Doug Miller, Bath Mortgage Broker and Director at Bath-based Lansdown Financial Services, says he regularly speaks to people who’ve been told by an online calculator they can borrow a certain amount, only to find the reality is very different – although more often than not, he says, they can actually borrow more than they realise.