When you're looking at homes you may wonder, how much of a mortgage can I get. Can I really afford the mortgage I'm given? To help you start figuring this out, we've compiled a list of tips and insider information to help you find your answers.
How Much of a Mortgage Can I Get?
Before you start home shopping and fall in love with a property, you need to determine how much you can actually borrow of your lending institution. To give yourself a general cost range prior to making it to the bank, consider the following.
Determine your Down Payment
Your mortgage isn't the price of the home, it's the borrowed money you spend on the home. This doesn't include the down payment, closing fees, or other fees. Though you may not think you can afford a $200,000 mortgage, a reasonable down payment brings down the mortgage and your monthly payments.
Consider What Will Increase Your Interest Rate
Interest rates in Canada are at an all-time low, but that doesn't mean your interest will sit at the lowest possible option. Your personal interest rate can vary depending on where the home is located, how much outstanding debt you have, and your credit score. These will also help to determine the size of the mortgage you're granted.
How Much of a Mortgage Can I Afford?
Be Wary of Mortgage Calculators
Although mortgage calculators can be outstanding tools for determining how much you are able to pay for each month, do not take the results as the amount that your mortgage should be. Instead view it as a red line that you should not cross, no matter how much money the lender is offering you.
Don't Spend the Entirety of Your Mortgage
After being officially approved for a loan, many prospective homeowners go for the top end of their mortgage when looking for a home; this is a mistake. Although you may technically be able to squeeze your monthly mortgage bill into your budget right now, this doesn't make it a good idea.
The lending institution that you are working with will not know how much you spend on groceries, entertainment, utilities, and other various costs. Remember that going for the top end of your approved mortgage amount will make it more difficult to save money, and put you in a difficult situation should any stream of income slows down or stops.
Check your interest rates
The interest rate that you receive will significantly impact the size of the mortgage that you can get. Even one percentage point can put a home's price out of your range. For example, if you can afford up to $980 per month for mortgage payments, a $200,000 30 year fixed-rate mortgage may seem feasible at 4% interest, where the monthly payments would be $955. But a 5% interest rate increases your monthly payments to $1074, which is outside of your budget.
Still wondering how much of a mortgage can I get? Contact us at Mary Roy and Team today and let us help you with your real estate needs.