Mortgage calculators “can create a false sense of certainty” for first-time buyers, industry experts have warned. While online tools can be a useful starting point, brokers say the figures they produce often fail to reflect the complexities of individual circumstances and there can be huge variations between lenders.
Many online calculators ask would-be homeowners to enter a salary and a few personal details before returning an estimated borrowing figure. Google’s own AI-generated mortgage calculator, served above some UK search results for “mortgage calculators”, gave its answer in dollars on October 5.
Why mortgage calculators can mislead
Richard Davidson, mortgage advisor at onlinemortgageadvisor.co.uk, said that while online calculators could provide a useful starting point, they often fail to account for the complexities of individual circumstances. He said: “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.”
Stephen Perkins, Norwich mortgage broker and managing director of Norwich-based Yellow Brick Mortgages, said calculators can be “a useful tool” but warned first-time buyers should speak to brokers for a wider understanding. He added: “Mortgage calculators are useful for a rough indication, but they can create a false sense of certainty. We tested the same household across 10 major lender calculators and found a difference of more than £188,000 between the highest and lowest borrowing figures.
“That shows there simply isn’t one market-wide answer to ‘how much can I borrow?’ We deliberately don’t have an affordability calculator on our own website because we don’t want somebody basing their property search on a number that may bear little resemblance to what the wider market can actually offer. A calculator can be a starting point, but it shouldn’t become your budget.”
How brokers recommend using mortgage calculators
Craig Fish, director at London-based Lodestone Mortgages, said: “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 of Norwich-based Charwin Mortgages, criticised simple income-multiple tools: “Most mortgage calculators calculate a number. Ours calculates reality. Too many mortgage calculators are little more than an income multiple dressed up as technology: £50,000 income goes in, £225,000 comes out.
“Real mortgage lending is nothing like that. Age, income type, credit history, dependants, financial commitments, loan-to-value and property value can all materially change what someone can actually borrow.
“A calculator should not create false hope and leave the broker to deliver the bad news later. It should give people a credible answer from the start.”
Doug Miller, Bath mortgage broker and director of Bath-based Lansdown Financial Services, said: “Mortgage calculators are a great starting point, but borrowers should treat the figures as a guide, rather than as advice. Every lender assesses affordability differently, so borrowing power can vary by tens of thousands of pounds.
“We regularly speak 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 they can actually borrow more than they realise. We’ve built our own bespoke calculators into our new website because people want quick, useful answers. But a calculator can only provide an indication; a broker can look across the market and establish what’s actually achievable.”
Matt Coulson, founder of Rickmansworth-based Heron Financial, added: “I’m broadly a fan, with one important caveat. We build our own calculators and see them as a genuinely useful first step, because customers increasingly want to self-serve and we should be there to help them do it well. Where they mislead is when people treat the number as the answer.
“A calculator works off income multiples and a few inputs, so it gives you a ballpark. It can’t see how a specific lender treats your bonus, your self-employment, your credit commitments or your deposit, which is exactly why two lenders can land more than a hundred thousand pounds apart on the same person.”
