What is a mortgage calculator and should you use one?

Mortgages calculator

Finding the best mortgage deal has always been a pretty fraught process. Are mortgage calculators the answer – and if so, what should you be looking out for?

What does a mortgage calculator do?

Pretty much exactly what it says on the tin – a mortgage calculator takes data about your financial set up and calculates how much you could potentially borrow. Some go one step further and provide recommendations – the overall aim is to take the stress out of finding the perfect mortgage.

Are they any good?

Ask this question on Mumsnet and you will get a wide range of views (surprise!). Some users are great fans, and say they can help narrow down your search and save a chunk of precious time. Others question whether a common-or-garden mortgage calculator is really worth the bother – and it’s true that many services will simply multiply your annual household income by a factor of five and spit out a potential mortgage value. This may look great, but alas, it often turns out to be over-simplified and frustratingly over-optimistic.

There are lots of factors which impact how much a person can borrow, including employment type, income and spending levels, credit history and the type of property you’re hoping to buy. And to confuse things further, every lender assesses how much you can borrow in a different way – and almost all of them withhold the details of this calculation, even from brokers. Mortgage calculators often have a hard time replicating the lender's process, and as a result often produce misleading results.

But don’t panic – the trick is to know how to distinguish the calculators that see the big picture from those which are really just a gussied-up marketing tool.

What makes a great mortgage calculator?
Mortgage calculator sum

As a general rule, look for something which goes further than simply asking about annual income and potential deposits. Ideally, a great mortgage calculator should have some or all of the following features:

  • Takes into account your entire “financial self”. Ideally, look for a service that factors in your employment, attitude to risk, and personal life plans.
  • Builds in additional costs such as stamp duty and estimated up front fees.
  • Makes recommendations beyond simply selling you a mortgage: for example, offers insights into how your current financial lifestyle can shape the type of product you should take.

Should I use a mortgage calculator?

Well that’s down to you, of course – it’s a matter of personal preference. Some people like the face-to-face reassurance of a meeting with a mortgage broker or bank representative – others like to minimize human contact as much as possible [wink]. If you’re one of the latter group, have a look around before you settle, and look critically at the tools you come across. After all, there’s no point saving time if the answers you get don’t actually get you closer to the holy grail – a mortgage that fits your real financial life, perfectly.

In association with Habito – fast, free, transparent and impartial mortgage advice