We have recently launched the first of several new mortgage calculators which aim to bring much more sophisticated systems for borrowers to assess their lending ability online.
The most important of these new calculators is the maximum loan calculator which actually models some of the more complex systems for affordability lenders are using to assess customers borrowing potential.
Lenders are increasingly stepping away from using pure income multiples and the large high street banks and building societies now take into account many factors including credit scoring, number of financial dependents and overall debt to income ratio to decide on an appropriate borrowing figure.
The calculator is as far as we are aware the only one currently available which actually illustrates how different types of lenders calculations vary and takes into account dependents, existing credit commitments and credit scoring.
There are several more new tools in development which will soon be added so keep an eye out for more to come.
The next part of my why you should use a mortgage broker theme of the week is the humble affordability calculator.
We do a little pay per click advertising on the various search engines, this is no secret. But it surprised me to see so many hits coming through the somewhat spurious term “mortgage calculator” and it occurred to me that rather than this being people searching to find out what their monthly payment would be (as pretty much everyone has one of these calculators) it is probably people looking to see how much they can borrow.
If this is the case and you are reading this article because you were looking to find that out let me explain something, calculators that purport to tell you what the maximum you can borrow is are a waste of your time. Plain and simple.
The reason is this, every lender will take a multiple of your income and your partners if applicable or a percentage of your gross or net income and the sum will be different with ever lender. They may then deduct your loans and other credit commitments (but the way they do this will also be different with every lender). They may deduct a figure for each dependent child you have, and they may use their standard variable as a basis for affordability or the product rate you will be borrowing if they use a rate to calculate it at all.
Clearly a calculator cannot be set up to work out the maximum based on all the different methods of assessment used, so they use a “best case” method to give you a rough idea. This might seem useful but if the best case happens to be a bit optimistic it could cause you some big headaches and if it is woefully underestimated then you might miss your dream home based on poor information. The only calculators that are reliable are those on lenders websites, but they only work for that lender and will often be based around your credit score anyway which you cannot predict.
Affordability assessment is very complex and is an ever changing landscape, so if you want to know what the maximum you can borrow is speak to a mortgage advisor as that’s what we’re here for.
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Just a quick post today to say our website www.rightmortgageadvice.co.uk has recenly been re-launched including lots of new content, online quote forms, mortgage calcultors and much more.
Theres lots of new information about other areas of our business including Commercial Insurance, Key Persons’ Insurance, Shareholder & Partnership Protection plans, our conveyancing partners, Life Insurance, Critical Illness cover, Permanent Health Insurance, Home Insurance and much more so if you haven’t stopped by recently drop in and take a fresh look.