Mastering Mortgage Calculators: A Guide to Online Tools

If you’re reading this, it’s likely you want a deeper understanding of how online mortgage calculators typically work. Then, how they can assist you in making informed decisions about your mortgage.

We will not only unravel the functionality of mortgage calculators but also help you understand how they are used to target, and potentially mislead, consumers like you.

What does a mortgage calculator do?

Unlike buying most products online, taking out to mortgage requires a detailed fact find, extensive research, because considering what might happen in the future and advice on what is suitable. That is the summarised role of a broker. There is much more besides.

Most mortgage calculators do the opposite of this. They will ask a small number of questions and offer little more than a best buy table.

• They won’t take your credit history into consideration
• They won’t consider your circumstances and income in detail
• They won’t check if you qualify for particular mortgage
• They weren’t consider if the mortgage is suitable to you both now and in the future
• There won’t give you any of advice whatsoever
• They will simply list the best rates of available from a sample of lenders irrespective of whether you qualify or it is suitable

In virtually every case they are a tool to hook your interest by offering leading rates.
Reality kicks in later.

Mortgage calculators from unauthorised Lead Generators

Whilst the regulator is trying to clamp down on an authorised advertisers, there remain numerous organisations which are not regulated and seek to mislead. To the untrained eye they appear to be mortgage providers. But beware. Whilst these companies are often proficient in advertising, they are not bound by the same rules as mortgage companies and authorised brokers. The requirements to treat customers fairly do not exist. Neither do the requirements to be clear, fair and not misleading.

Their function is to gather your information and sell it to the highest bidder.
You can’t rely on what you are told on their websites to be truthful. You are unlikely to know who they’re going to sell your data to. And you don’t know the credentials or ethics of the company which may contact you as a result.

Activities such as this have been outlawed in the industry but the policing is not effective. So you could get caught.

Check if the mortgage calculator is from an authorised company

You should only arrange finance via a website or company which is authorised by the Financial Conduct Authority. This will give you comfort that you are being treated correctly. You will also get recourse to an official complaints procedure and the Financial Ombudsman if that doesn’t happen.

Scroll to the bottom of most websites and you will find the company will state its FCA authorization and reference number. You can check that this is genuine on the FCA register-click here

Caution with mortgage calculators on comparison sites

Can you tell the difference between the mortgage calculator webpage of an unauthorised lead generator and the comparison site? The often look very similar. As above, scroll to the foot of the website and you should find the FCA authorization details.

Remember, an authorised comparison site they give you more accurate information. However, they too are also lead generators with a main purpose of gathering your information and selling it to a third party.

The mortgage calculators they offer are generally just a comparison tool to compare rates. It does not mean that you will qualify for these rates or that the mortgages suitable for your needs.

It therefore raises the question, what is the point? Other than to hook your interest and gather your data?!

You need to be certain that the company you will be referred to can offer you a whole of market selection of products and advise on their suitability. Alternatively, be confident and satisfied with your own limited research.

Direct Lenders mortgage calculators: Pros and Cons

It is possible to apply directly to a lender and they may also offer a mortgage calculator. In this scenario you are still being offered a comparison tool but only comparing the products from one lender. This makes little sense for most people as you are limiting your choice of lenders, products and terms to a small number. If you looked to the whole market the availability of products runs into the 1,000’s. Lenders have very different policies on loan to value, affordability, type of income, type of property, credit history, etc, etc. So, why would you take a mortgage from one provider without checking out what else is on offer?

Imagine you’ve applied to a bank and they know that the bank next door is offering a cheaper rate for exactly the same circumstances. They won’t tell you this . They will simply offer you there cheapest or most suitable mortgage.

That’s where a broker comes in.

The Pivotal Role of Brokers

Your ideal broker is one which offers a large panel of lenders representing the whole of the UK mortgage and secured loan market. Secured loans are important in the event of raising additional capital as they can often offer a better solution than a remortgage.

Research and advise

In addition to offering you massive choice of products your broker must:

• Consider your circumstances both now in the future to make sure the loan or mortgage is suitable in the long term.
• Consider all the products available to them and off of those which are most suitable
• Have products available which cover vanilla mortgages all the way through to complex scenarios
• Treat you fairly and explain everything in an unbiased manner so you can make informed decisions.
• Advise you on the suitable option from the brokers extensive panel of lenders.
• Evidence why their recommendation is suitable
• Be accountable for that advice for years into the future. If it turns out to have been bad advice and the broker was negligent or dishonest in providing such advice, you can apply to the Financial Ombudsman for compensation

Preparation, packaging and problem solving

With most mortgage applications, problems can occur. Often due to incorrect paperwork, borrowers not being able to provide information, valuation issues and particularly from poor service by solicitors.

Your broker is paid on results. It is in his or her interest to smooth out any bumps along the way and overcome any hurdles which might prevent or delay your mortgage.

The role of liaising with the borrower, the lender, the borrowers solicitors come at the lenders solicitors is invaluable but time consuming.

Brokers may earn a commission, charge a small fee or both for their services. However, the cost of any fees can easily be outweighed by getting a cheaper rate, lower lender fees, faster completion or simply reducing the hassle you might experience.

Conclusion

Do not be under the illusion that a mortgage calculator is going to help you in a meaningful way. Not unless you’re circumstances are so perfect that you qualify for the best product from every lender.

Stay clear of comparison sites which are not authorised by the FCA. Be mindful the information comparison sites provide is general and not specific to you

Consider applying to a lender if you are happy that you have done your research and this is the best product for you.

Consider using a broker, especially if you’re circumstances are anything less than perfect. By far the majority of mortgages in the UK are transacted through brokers. Whilst there may be some additional costs your broker should be able to justify these through savings in the rates, fees or value added service.