The Downside of Online Mortgage Calculators and How They Can Result in a Financial Crisis!

House shoppers that are rushing to turn their dream homes into reality before interest rated skyrocket usually look to online mortgage calculators to get that personal assistance regarding their finances and real estate sites to have a vision of the perfect home they will be able to afford.

Unfortunately, when turning to online mortgage calculators, some individuals can get pretty bad info regarding their future homes.

Indeed, a financial planner at Phase 2 Wealth Advisors Bob Harkson states that a majority of online mortgage calculators normally do not have the right information to give to individuals regarding the estimation of their house payments.

Finance professor at Middle Tennessee University Jones College of Business, Philip A. Seagraves, has a more negative outlook on online mortgage calculators. According to Philip, online calculators are simply click-bait to enable people to visit their mortgage sites.

The problem with online calculators is that they do not get a lot of information regarding your financial situation

What Information do Calculators Omit?

According to many critics online, calculators tend to leave out plenty of critical information regarding costs, not to mention having poor estimations.

Indeed, head of home mortgage lending at Citizen Bank, Mr. Sonu Mittal, says that features such as general maintenance, utilities, management fees, condo management, homeowner association dues, insurance, and taxes are many a time not factored in when analyzing traditional mortgage calculators.

Moreover, property taxes usually have the biggest omission in these calculations. The main reason why is because online calculators usually have three fields of input. These are the number of years, the interest rate, and the mortgage amount.

That being said, the resulting payments tend to be only interest and principal.

Nevertheless, monthly payments normally have a massive contribution when directed to an escrow fund in terms of annual property taxes.

Indeed, property taxes tend to have a significant variation depending on the tax rates from a local perspective, but can reach thousands of dollars on a yearly basis, adding hundreds of dollars a month in terms of mortgage payments per month.

Online calculators are not as legit as they make look so its wise to be careful

The Insurance Factor

Insurance is another vital item on the list that is often overlooked. Indeed, the cost of a given insurance policy by a homeowner is usually directed monthly within an escrow fund whereby the annual premium is paid every year once.

According to Harkson, not only does casualty insurance and property insurance play an important role in the calculation, but depending on your area of residence, flood insurance, and hurricane insurance is also important.

That being said, insurance premiums can result in hundreds of dollars being added to the monthly payments that one makes.

Additionally, the presence of association fees by homeowners is another item on the list that most calculators do not factor in.

As a matter of fact, there are a number of single-family homes that are under the governorship of an association and hence, tend to have no fees.

On the other hand, there are a couple that may ow fees translating to a few dollars on a monthly basis.

Nevertheless, some high-end master communities and condo associations may request payments that could amount to hundreds of dollars every month.

If that’s not enough, there could also be the case of private mortgage insurance which could be the case, especially for loans when borrowers are unable to fork out at least 20 percent.

Indeed, there are also other expenses not factored in with online mortgage calculators

The Factoring in of Annual Premiums

Indeed, the presence of annual premiums coming to as much as 1 percent of the given loan amount, can be the major difference in terms of affordability.

Apart from the aforementioned common costs, other monthly payments such as closing costs and points that are not paid in cash could also disrupt the estimation given by these calculators.

Moreover, payments such as repair costs and utility expenditure can also disrupt the finances of the homeowner, despite not being part of the mortgage payment. Unfortunately, for home shoppers that take these payments seriously, they can be setting themselves up for failure.

According to Mital, they might find themselves not able to qualify for a loan or even get the house that they desire until the time period has elapsed.

Worst of all, they might find themselves making qualification for a loan that they are unable to pay off because the estimations they had made were not accurate.

In conclusion, Seagreaves states that when an individual trusts values that can fluctuate at any moment, then they are setting themselves up for massive financial problems in the future.