The need for a mortgage calculator
Whenever anyone talks about buying a house and the advantages of using a mortgage calculator, I am always reminded of a story that happened a few years after I graduated from university. The hero of the story (if indeed that is the right word) was a college friend of mine called Brian. In a nutshell, Brian wanted to buy an old property and “do it up to make a quick buck”. Problem was, things weren’t quite as easy as Brian had initially imagined, and this initial venture of his into the world of property ownership was rather more complicated than he had bargained for. But before I go any further it might be best to say a word or two about Brian. Abounding with energy and eternally optimistic, he was one of those people who always knew better than anyone else. If conventional wisdom dictated that a repayment mortgage was the best choice, Brian would immediately talk at length about the benefits of an interest-only option. When PEP or equity linked mortgages were all the vogue, Brian would extol the advantages of endowment plans. And when someone referred to a particular property on the outskirts of town as being old and decrepit, Brian instantly saw his dream home and the opportunity to make a hansom profit.
And it is here that the story begins. Spurning advice from one and all (myself included) that he ought first to use a mortgage calculator to assess his monthly repayments, Brian bought the house sometime in early spring. It was a simple two bedroom affair and, as stated previously, in a condition that could only be described as awful. Almost everything needed replacing: the area between the kitchen and living room was structurally unsound; the garden hadn’t been looked after for years; and what remained of the woodwork was little more than a breeding ground for insects of every description. Needless to say, Brian was unperturbed. “Never mind”, he said. “I’ll get it fixed.” But he didn’t. As winter approached and costs started mounting, it became apparent that Brian could no longer keep up with his monthly repayments.
“Should have used a mortgage calculator”, he was heard to mutter on several occasions. And it was true. Because while his mortgage repayments were ostensibly quite low and easy to manage, the extra costs incurred by all the renovation work had pushed him to the verge of financial hardship. Had he properly calculated everything at the outset, he would not only have been able to gauge what was affordable and what was not, he would also have been able to plan the renovation work in such a way as not to cause cash flow problems. Fortunately, though, the story didn’t end quite as dramatically as many people had begun to fear. Brian’s father came to the rescue early in the New Year and, along with a bit of fatherly advice, generously agreed to loan Brian enough money to ensure that everything got finished.
