Online Mortgage Calculators: What Buyers Need to Know

Real estate and financial advisors provide the necessary context when it comes to home-buying.

Prospective homebuyers and lenders alike will by now be exceedingly familiar with online mortgage calculators—just a quick Google search pulls up an ever-growing selection: Zillow, Redfin, Trulia, Lending Tree …the list goes on. Even Google itself now offers a mortgage calculator. Additionally, financial institutions, real estate sites and broker sites almost all feature the tool. The prevalence and variation of these calculators, however, can often introduce more questions than answers.

“I’m absolutely for giving consumers as much data and info as they need and want,” says Chicago Home Partner’s Amanda McMillan, a 17-year real estate veteran who’s performed in the top 1% of Windy City-based realtors for the last 12 years. “That being said, I’m also very cognizant of miseducation, because obviously in this industry, there’s a ton of info out there. Consumers can get data easily, but they don’t necessarily know how to process it.”

Enter the potential information overload of online mortgage calculators.

“Mortgage calculators are surface-level tools and fairly inconsistent,” McMillan explained. “For a consumer that doesn’t fully know what they want and need in a financial product, a mortgage calculator may not give the right answer, or might give an incomplete answer. Many don’t include assessments for condos, or taxes, or different types of insurance and so on. There’s a lot of pieces to consider.”

McMillan also pointed out that this may mean a leaner quote coming from a mortgage calculator, but one that “doesn’t necessarily reflect all of a client’s needs.”

Danny Lewis of The Lewis Real Estate Group, part of EXIT Strategy Realty, has worked as a real estate broker for the last eight years, ranking in the top one percent of Chicago producers in 2017. He said that he sees a way such tools like mortgage calculators can aid a prospective buyer in their decision.

“I use mortgage calculators in my role because they provide different ways to think about payments. Seeing what you pay per month can be easier to understand than a payment over years,” Lewis said. “One of the main things buyers are afraid of is not knowing what their costs are going to be, and what they can afford. A mortgage calculator gives wary buyers an exact idea of monthly cost. For a first-time buyer, there’s no better information you can give than the numbers and the clarity of what those numbers mean.”

Both Lewis and McMillan stress the importance of working closely with a buying team that includes a customer’s real estate agent, lender and, in many cases, insurance agent.

“The number one person to look to in figuring out what to do is your lender,” Lewis said. “They have programs they can run for a given client that are tailored to the client’s needs. Also, reach out to your insurance agent to make sure there aren’t any expenses you’re missing.”

McMillan emphasized the importance of considering buyer expenses holistically.

“What I always say in this business is: ‘it’s not about the price of a property, it’s about the cost of a property,’” McMillan explained. “Much more valuable than an online mortgage calculator is an awesome lender. An awesome lender will take the role of a mortgage calculator and then some—they can send propositions, put together formulated Excel docs specific to that consumer’s loan products and more.”

McMillan further explained that lenders provide needed context for buyers to make an informed decision. “Everyone wants to think that they qualify for the best rates [on a home], but sometimes it’s not about the candidate, it’s about the property,” McMillan said. In such cases, having a lender advocating on their behalf is very much in a buyer’s best interest.

The more conservative buyer may be wondering if there’s room in their planning for online mortgage calculators. McMillan says there is.

“The process of getting familiar with the numbers is a good thing. [A buyer] just needs to go in with an open mind and understand that a mortgage calculator is not necessarily specific to their needs, but it’s a good toe in the water.”

Finally, McMillan stresses the importance of marshaling the resources of a financial and real estate advising team.

“Your financial advisor and real estate advisor should be long-term partnerships. People sometimes say, ‘Oh, I’m not looking to buy for a while. I don’t want to take up someone’s time,’ but we prefer to get in on the partnership early, to guide and steer our clients on their long-term path. Having more time only puts us in a better position to do so.”