Date Posted: June 21, 2021
It is a good idea to plan out your mortgage in advance. By doing this you will be able to save money and be better prepared to deal with anything unexpected financially.
Borrow less than you are allowed
When mortgage professionals use to rules to decide how much they will lend to you. First, your housing costs should not be more than 32% of your gross income. These costs include, interest, taxes, heating expenses and half of your condo fees if any. Second, your total debt including cars and credit cards, should not be more than 40% of your gross income. When it comes to borrowing the maximum amount, it can be risky. If your income drops, interest rates rise or, your expenses increase, it may make it much harder to make your payments.
Think about how higher interest rates would affect your payments. An increase in the interest rate will increase any of your future monthly payments. As an example, if interest rates rise from 5% to 7%, renewing a $250,00 mortgage will cost an extra 300$ a month.
It is also a good idea to make the decision to pay off your mortgage faster. Ways to do this include, increasing your regular payment amount, make lump sum payments to your mortgage principal, and/or make accelerated payments.
For more information or advice, reach out to a Mortgage Broker today!
For the full article CMHC article, click here.