Forecasting the cost of property investment: are you using a mortgage calculator?

There are a whole range of costs associated with investing in property. Whether it is a major refurbishment or the need for some minor repairs, the true cost of property investments can be difficult to accurately predict. This means that having some control over the other aspects of the investment is even more important, and chief among these costs has to be the mortgage. In the past, the ongoing cost of some mortgage products could be hard to forecast.

Now internet tools such as the Mortgage Calculator can help with some of the number crunching. There are quite a few different versions of this type of software online, provided by organisations from broadcasters and charities to the big high street banks. To take an example, we will now take a brief look at some of the functions of the free to use Mortgage Calculator from Santander (see the website).

The mortgage calculator makes two major predictions based on the data you enter, which are: the projected cost of repayments, and an estimate of the maximum loan for which you could apply. For the former, the entry of the property value and the amount of deposit or equity you have is standard. If you have more than the minimum deposit at hand for the investment, be as accurate as you can about this figure, which admittedly can be difficult if you don’t yet know what the building costs will be. The reason that the amount of equity or deposit is important is of course that the rates of interest you will be offered on both tracker and fixed mortgages will vary according to the loan to value percentage – it’s not all about just hitting the required minimum.

The term of the mortgage is an entry to come back to when you want to tweak the estimate towards a monthly figure in the right ball park. The thing to really focus on are the conditions of the mortgage during the initial deal period, during which you will usually be locked into the deal, and after which you can think about remortgaging as required.

As the box requesting to know which kind of buyer tells you, there will be different products offered depending on whether you are a first time buyer, moving home or remortgaging. Remortgaging with the same bank is understandably encouraged, as a way for the lender to retain business. Those who also have savings lodged with the lender can look at the option of flexible offset mortgages, which reward you for keeping your savings with the bank by offering cheaper interest on mortgage repayments.

Those looking at this option are offered the next version of the mortgage calculator, which gives a prediction of maximum loan amount. This can again be helpful when you are at the initial stages of planning a property investment, although as the disclaimer reports the figures produced are not a firm or binding offer, but instead an indication. If you want more information, impartial advice on different mortgages is available at www.moneyadviceservice.org.uk .
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