The Ideal Mortgage Calculator
In the Solve Usury article, we introduced the concept of providing the right tools—namely, a transparent, user-friendly calculation tool with shareable results—to help combat usury.
While many banks already offer online mortgage calculators aimed at helping users estimate their loan costs, these often fall short of what is truly needed. So, what features should an ideal mortgage calculator include to genuinely aid borrowers?
Offer a Lot of Information, Ask for Little
Obviously, you need to provide with some loan parameters, such as the amount you wish to borrow, the loan term etc. But should you have to provide personal information like your email, name, salary, or ZIP code right from the start?
While this may benefit lenders by allowing them to engage with potential customers more directly, it doesn't necessarily serve your best interests as a borrower. For a customer, it's better to gather information first, and offer their private information only at the final stage of vetting.
Flexibility in Calculation
Typically, mortgage calculators allow users to adjust only one parameter, two at best (e.g. the loan amount, and the time period).
One should be able to choose the free parameter, e.g. change the interest rate, and see the impact on the monthly payment, or change the monthly payment and see the impact on the time period. Or set the outstanding balance in 10 years, and get the loan amount.
User-Friendly UI
Well, it should look nice, represent the information in the meaningful way (not too dense, omit some redundant information), be intuitive etc.
'Sharability'
In an ideal scenario, a mortgage calculator would enable borrowers to effortlessly share their loan parameters with others.
This functionality is crucial for facilitating discussions with financial advisors, family members, or random forum visitors involved in the decision-making process.
National specifics
The way the loans are structured may differ quite a lot among the countries due to taxes, laws, mentality.
e.g. in Switzerland, regulations dictate that the borrowers should be able to service the loan at 5% p.a. and spend at most one third of the income towards it, and pay down at least 20% of the house. At the same time, the loan isn't expected to be paid off completely by the end of the loan contract (however, there's a minimal amount that has to be amortized). As a result, the Swiss mortgage calculators tend to focused on the loan eligibility.
In Germany, the loans are rather paid down to zero at the end of the loan contract. Thus, the mortgage calculators have different focus and even different KPI (e.g. 'anfängliche Tilgung' - how much of the loan is amortized in the first year).
Ranking
In the forthcoming article, I will evaluate various mortgage calculators against the criteria outlined above.
It will allow us to see how big is the gap between the current state of mortgage calculators and the ideal, helping us understand how far we are from providing borrowers with the tools they truly need.