Designing the First Co-Buying Calculator

PairGap is a platform that simplifies co-ownership of homes, making homeownership more accessible for multi-buyers. They streamline the co-buying process, helping with finding the right property, securing a suitable loan, and navigating every step of the journey. Their goal is to empower individuals, partners, and families by placing the power of homeownership in their hands.

After launching the PairGap SaaS platform and Community, the main stakeholder aimed to create a groundbreaking co-buying calculator, integrating mortgage and debt-to-income calculators into a single tool for one or more buyers, a concept unprecedented in the Real Estate industry to generate more leads. Unlike traditional separate calculators, this innovative approach allows for multiple buyers (co-buyers) and facilitates payment splitting, providing a comprehensive visualization of homeownership possibilities.

The initiative involved integrating well-known financial tools and creating an automated solution tailored for both individual and potential co-buyers. This integrated tool includes:

• A Mortgage Calculator
• A Debt-to-Income (DTI) Calculator for both Single and Co-Buyers
• Results tailored for Individuals and Co-Buyers

This unified tool merges various calculators to efficiently generate new leads, enticing potential buyers to become part of our community.

The approach commenced with an in-depth exploration of existing mortgage calculators to draw inspiration and existing calculations for Monthly Payments. Notably, Bankrate and NerdWallet emerged as exemplars of innovative design and functionality.

I encountered several formulas essential for calculating monthly payments including:

Formula 1

Monthly Payment = P x (r / n) x (1 + r / n)^n(t)] / (1 + r / n)^n(t) — 1

Formula 2

Monthly Payment = P [ i(1 + i)^n ] / [ (1 + i)^n — 1] Here, the variables denote:
M = monthly mortgage payment
P = principal amount
i = monthly interest rate (derived by dividing the annual rate by 12)
n = total number of payments over the loan term

Formula 3

L[c(1 + c)^n]/[(1 + c)^n — 1]

The L represents the loan amount, C denotes the per-payment interest, and N signifies the payment number.

While there are numerous standalone Mortgage and Debt-to-Income (DTI) Calculators available, only a few combine these functionalities. Documenting all the features needed for Monthly Payment , I subsequently began to experiment in the initial design phase, opting for a design style that was user-friendly.

Proceeding with the Debt-to-Income (DTI) calculation, I drew inspiration from Zillow’s methodology. I discovered that the optimal formula for DTI is:

DTI = Gross Monthly Income / Total of Monthly Debt Payments

The DTI ratio serves as a critical financial metric, comparing an individual’s monthly debt payment to their gross monthly income. This ratio is instrumental for lenders, particularly mortgage lenders, in assessing an individual’s capacity to manage monthly payments and repay debts.

To calculate DTI:

• Sum up all monthly debt payments, including credit cards, loans, and other obligations.
• Divide the total monthly debt payment amount by the monthly gross income.
• Multiply the result by 100 to obtain the DTI percentage.

While the DTI calculation is conceptually straightforward, I iterated on the design to visualize its presentation for both individual and joint applicants. The complexity arose when incorporating co-buyers, particularly in formulating the potential mathematical equations.

Integrating an additional individual not only amplifies the down payment deposits in the mortgage calculator but also necessitates the division of monthly debts for the DTI calculation. Subsequently, the calculator must calculate the sum of the split payments.

For instance, when there are two co-buyers, the total is divided by two for split payments. Similarly, for three co-buyers, it is divided by three, and so forth, up to a maximum of four co-buyers for the product scope.

Proceeding with the Debt-to-Income (DTI) calculation, I drew inspiration from Zillow’s methodology. I discovered that the optimal formula for DTI is:

DTI = Gross Monthly Income / Total of Monthly Debt Payments

The DTI ratio serves as a critical financial metric, comparing an individual’s monthly debt payment to their gross monthly income. This ratio is instrumental for lenders, particularly mortgage lenders, in assessing an individual’s capacity to manage monthly payments and repay debts.

To calculate DTI:

• Sum up all monthly debt payments, including credit cards, loans, and other obligations.
• Divide the total monthly debt payment amount by the monthly gross income.
• Multiply the result by 100 to obtain the DTI percentage.

While the DTI calculation is conceptually straightforward, I iterated on the design to visualize its presentation for both individual and joint applicants. The complexity arose when incorporating co-buyers, particularly in formulating the potential mathematical equations.

Integrating an additional individual not only amplifies the down payment deposits in the mortgage calculator but also necessitates the division of monthly debts for the DTI calculation. Subsequently, the calculator must calculate the sum of the split payments.

For instance, when there are two co-buyers, the total is divided by two for split payments. Similarly, for three co-buyers, it is divided by three, and so forth, up to a maximum of four co-buyers for the product scope.

Finalizing the buyer power section, the user is now presented accurate financial information that can significantly enhance the purchasing capacity for individuals and partners looking to buy property together.

Multiple design iterations were explored, and the calculator underwent numerous refinements throughout the initial design process.

In preparation for development for the custom API and product feature, we defined and documented each feature of the calculator.

• Zip Code: Developing a custom API, the goal is to get the average sales price of homes based on the zip code using city data formulated in our equation.
• Sales Price: The sales price will auto-populate, however, adjustable by the slider and in the future by input.
• Monthly Payment: The total monthly home payment will include mortgage principal, interest, property taxes, and homeowner’s insurance. HOA will not be included in this calculator for this first version.
• Co-Buyer Payment: Your housing payment divided by the number of co-investors. This will only show if there is more than one buyer.
• Affordability: The maximum amount can be borrowed and comfortably paid each month, as shown by the slider going up and down.
• Affordable: 36% and Below will be calculated on the slider for the debt-to-income ratio (DTI) would be 36%, meaning 36% of your pretax income would go toward mortgage and other debts.
• Stretching: 36% to 43% will be calculated as stretching on the slider. The maximum payment you can afford. How much you borrow is different from how much you can afford to repay without stretching your budget for other important items too thin.
• Aggressive: 43% or more. You may not qualify based on the information provided. You may need a higher income or increase the amount of your down payment.
• Your Annual Income: Your total income before any deductions such as taxes, 401(k) contributions, Medicare, or Social Security contributions. Income sources include full and part-time wages earned, including overtime, commissions & bonus, self-employment, court awarded child support, social security, pension & dividends.
• Debts: Your monthly debt reported to the credit agencies.
• Down Payment: The borrower’s amount of money towards the purchase.
• Add Co-Buyer: Split payments.
• Length of Loan: Change to “Loan Term” The term of your loan is how long you have to repay the loan.
• Monthly Property Tax: The money you pay to your local and state government for owning property within their jurisdiction. This is usually based on the property’s value and land you own.
• Monthly Homeowners Insurance: Homeowner’s insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary. When you have a mortgage, your lender wants to ensure your property is protected by insurance. That’s why lenders generally require proof that you have homeowner’s insurance. Default numbers are estimates. Enter numbers that match your location for the best results.
• Interest Rate: The percentage of the outstanding balance of a loan that you are charged for borrowing money is usually expressed as an annual percentage rate. Interest is only one of many costs associated with getting a mortgage. It is calculated using 30-year conforming rates.
• P&I — Principle & Interest: The principal is the amount you borrowed and have to pay back, and interest is what the lender charges for lending you the money.
• PMI — Private Mortgage Insurance: Borrowers making a down payment of less than 20 percent of the home’s purchase price will need to pay for mortgage insurance. Mortgage insurance also is typically required on FHA and USDA loans. Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan. If you are required to pay mortgage insurance, it will be included in the total monthly payment that you make to your lender, your closing costs, or both.
• Closing Cost: When you buy a home, you generally pay all the costs associated with that transaction.

Through the utilization of Excel, the development team meticulously aligned and processed the calculations provided to them during the initial phase of the project without adding the Zip Codes.

As this represents the initial version, the primary objective is to fortify the foundation by integrating further feedback and incorporating additional formulas where necessary. Presently, data collection is underway to explore potential pivot strategies.

Call to actions info saving, emailing, and/or scheduling a consultation with a specialist.

This tool has proven instrumental in showcasing its worth to prospective purchasers and stands as a pivotal feature of the platform, facilitating connections among potential co-buyers to explore economically viable alternatives.

Worked collaboratively and managed a tech team of seven: 2 designers, 2 researchers, 3 engineers.

Test the product yourself: https://pairgap.com/calculator/