House Purchase Costs, Mortgage & Valuation Calculator

Fill in the form below to calculate one or all of the following.

Step 1	House Purchase Costs: Calculate full costs incurred when buying a house.
Step 2	Mortgage: Calculate your mortgage repayments.
Steps 3, 4 & 5	Valuation: The ‘House Purchase Costs, Mortgage & Valuation’ calculator below also replicates how Royal Institution of Chartered Surveyors (RICS) value property using the Discounted Cash Flow (DCF) method to find its Market Value (MV) or Net Present Value (NPV).

The calculator, if used correctly by following the instructions at the bottom of this page will accurately estimate the current Market Value (MV) of your property.

Calculator Instructions

‘House Purchase Costs, Mortgage & Valuation’

The calculator above is very powerful. If you are careful about inputting reasonable assumptions you will be able to quite accurately calculate the Market Value (MV) or Net Present Value (NPV) of a property using the Discounted Cash Flow (DCF) method of valuation.

White cells	Should be filled in (or left blank if not relevant).
Grey cells	Cannot be filled in manually – they will be automatically populated.
‘Calculate’ button	Click this after making changes to the form to recalculate. It may take 20 seconds to recalculate.

Step 1 - Total Cost to Purchase Property (House Purchase Costs)

Calculates the total cost to purchase a property including mortgage deposit and stamp duty based on the data you input. In ‘Mortgage loan to value (LTV)’ insert what percent mortgage you will be using e.g 85%.

Step 2 - Mortgage Deal

Input your agreed mortgage deal such as 6.50% interest over 25 years. Then choose how you intend to pay the mortgage, either ‘Interest only repayments’ or ‘Interest and capital repayments’.

Step 3 - Rental Income

Input a reasonable ‘Rent per week’ figure that the property could achieve if let. Help on this figure can be sourced from local agents or adverts found on Gumtree.com. Input a conservative ‘Rental growth rate p.a’ - a conservative average is 2.00% per annum. ‘Rental vacancy’ periods can be anywhere between 0 and 12 weeks per year depending on location and rental aspirations.

Step 4 - Other Yearly Costs

Include the yearly leasehold service charge (SC) if the property is not held freehold. Maintenance and property insurance p.a should be estimated, a growth rate of 2.5% is prudent. ‘Management %’ should be included if this property is to be managed by an agent. The management percentage can range dramatically depending on location, agent and service offered. Usually it is anywhere between 3% and 15%.

Step 5 - Investment - Net Present Value and Equity

This section shows the investment potential of the property given the assumptions made. It is important to understand this section especially the discount rate. See below.

Year 1 Net profit - will usually be negative due to the associated extra costs of buying a house over and above the mortgage. Year 1 Initial yield - is simply the gross rent divided by the property purchase price.

Assumed capital growth p.a – Input the percentage by which you assume the capital value of the property will grow, per annum. Capital values can decrease so it is prudent to put a low and reasonable figure in this cell maybe 2.5%. Note that there will be a change in ‘Property Value at end of Mortgage’ (i.e. the value of the property at the end of the proposed mortgage term) after you recalculate.

Discount rate p.a - The discount rate is the rate, shown as a percentage, used to discount the expected cash flow over time. The discount rate is also known as the opportunity cost of money invested, for example you could just put the money in the bank. Many European property investment funds use a discount rate of around 6.00% when looking at long term (10 year plus) investments. UK property funds tend to be a tad lower. We believe that 6.00% is a prudent rate to adopt. The final result is very sensitive to the choice of discount rate — a small change in the discount rate causes a large change in the value.

Download the DCF - Finally, you can download the entire DCF by clicking the green “Download as Excel File”. It produces a nice succinct report.

HouseRepossession.co.uk was built to help people understand the value of property better so we thought that this piece explained DCF’s and Present Value (PV) a little further:

“A discounted cash flow (DCF) is the most fundamentally correct way of valuing an investment.”

“In a DCF valuation, a discount rate is chosen which reflects the risk (the higher the risk the higher the discount rate) and this is used to discount all forecast future cash flows to calculate a present value.

“DCF is an investment valuation technique that establishes the value of an investment by considering the value of the expected cash flow and the opportunity cost of the money invested. As money accruing in the future is worth less to a firm or property owner than money it has in the bank today, future cash flow is discounted to give a Present Value (PV). The total present values minus total capital outlay provide the Net Present Value (NPV); this figure will be positive if the investment justifies the opportunity cost. http://encyclopedia.farlex.com/discounted+cash+flow

Furthermore you can play with discount rates and the Net Present Value here to understand how they affect the value of an investment. http://www.paloalto.co.uk/common/calculators/uk/ukdcf.cfm

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