It’s probably not a coincidence that algorithms lowball the value of specific homes, or that calculators spit out a low number by omitting crucial information. Zillow’s popular Zestimates, which people tend to view as almost an appraisal of a home’s value ( though Zillow disputed this in court ) might not accurately value a particular home because of this records issue or it might not recognize improvements made to a home, like adding an extra bathroom or it might not have a lot of data to work with for neighborhoods that don’t have a lot of recent home sales. What about calculators for specific homes? The data still might not be accurate! For example, errors might exist from the local property tax database (or from lack of updates to it). And what if a mortgage calculator actually does factor in all those extra costs? Yyyyes, assuming the interest is correct - but it might not be! The Consumer Financial Protection Bureau has a decent interest rate tool, but in any case, keep in mind that the interest rates you see usually apply only for those who can afford a down payment of 20 percent, and have an excellent credit score. But look, surely even computing just the principal and interest is, I dunno, somewhat useful? One sec, need to go sob in a dark room for a while. Those include origination and lender fees any points you buy to lower the interest rate third-party stuff like the title insurance, home inspection and appraisal any local real estate transaction fees and prepaid expenses like the first year’s premium, the prorated mortgage interest between the time you close and the end of the first month, and initial deposits for property taxes. Then there are a lot of closing costs involved at the end of the sale, which don’t really factor into the total monthly payment, but they sure can’t be ignored when you’re buying a home. If you’re buying a condo, there will probably be HOA dues. You ready? There’s private mortgage insurance, which you’ll need to buy if you’re putting less than 20 percent down (it usually ends up costing, on an annual basis, up to 1 percent of the loan amount, which really adds up over time). In fact, the monthly payment might even end up being double the sum of the principal and interest, after you add in all those other things. Lots of mortgage calculators just calculate the principal and interest - that’s leaving out many other significant costs of the home. Well, to start with, most don’t give you a complete picture of the costs, meaning that a homebuyer will be on the hook for a lot of shit that these calculators don’t bother to factor in. Mortgage Calculator, Dave Ramsey, the VA and some others) aren’t that great either, according to the Consumer Financial Protection Bureau. What’s worse is that even the ones that are somewhat based in reality (with the exceptions of U.S.
There’s no good explanation for why some of them are just useless random number generators, beyond the fact that, hey, many, many companies don’t give the slightest shit about honesty or facts when trying to pry money out of your tightly clenched fists.
Why exactly do mortgage calculators suck, though? Okay, they’re largely marketing junk, got it.
Here’s a web developer that designs them for your website, and refers to them as “inbound marketing” for “capturing leads.” “You may be surprised at how high the conversion rates on interactive calculators are,” it says on the website. Any loan officer, never mind bank, can easily arrange to add one. In a CNBC article on the matter, he stated, “My opinion of the online calculators is that they’re really just clickbait to get people to a mortgage site.”Īnd lo, if you’re looking for clickbait to bring an unsuspecting nation of prospective homebuyers to your site, it’s not even hard to procure. Seagraves, an economics and finance professor at Middle Tennessee State University’s Jones College of Business. Let’s just call these calculators what they are: clickbait. So are mortgage calculators accurate, then? Nah, I’m just kidding, tell me why they suck. What use, then, are these things to anyone? And why do they usually suck so hard? We calculated some noticeably more accurate answers. Does it make any sense whatsoever? Is it in any way even vaguely helpful for it to tell you that you can afford double what any reasonable, ethical financial adviser says you can? And holy crap, do they suck! Take this one from CNN, for example. If you’ve ever at least had a passing interest in buying a home, you’ve probably tried to use one of those mortgage calculators online to see how much of a home you can actually afford.
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